NISM V-D Exchange Traded Interest Rate Futures — Practice Questions
The heaviest Module 3 chapter: contract specifications of exchange-traded interest rate futures on government bonds and T-bills, pricing, the cheapest-to-deliver concept, margins and settlement.
46 questions on Interest Rate Futures in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Contract specifications
- Pricing of interest rate futures
- Cheapest-to-deliver
- Margins and settlement
Free sample questions
1. The clearing corporation in India functions as the __________ for exchange-traded interest rate derivatives, providing a trade guarantee by becoming a party to each transaction
- A. Central counterparty ✅
- B. Custodian
- C. Depository
- D. Broker
Answer: A — Central counterparty
Why: The Clearing Corporation acts as a central counterparty i.e., it provides financial guarantees for all transactions executed on the Exchange. It acts as a legal counterparty to all trades through the process called novation. Thus Clearing Corporation becomes the buyer to every seller and seller to every buyer. If there is a default in this scenario, Clearing Corporation being counter party, is responsible for ensuring the settlement, thus managing risk and guaranteeing settlement to both the parties.
💡 Clearing corporation = CENTRAL COUNTERPARTY via novation; buyer to seller, seller to buyer.
2. How is the closing price for cash-settled GOI bond futures contracts determined for a trading day? It's based on _______ .
- A. The weighted average of all transaction prices for that contract in the last half hour of the trading day, calculated across all relevant exchanges ✅
- B. The weighted average of all transaction prices for that contract in the last one hour of the trading day, calculated across all relevant exchanges
- C. The weighted average of all transaction prices for that contract in the last one and half hour of the trading day, calculated across all relevant exchanges
- D. None of these
Answer: A — The weighted average of all transaction prices for that contract in the last half hour of the trading day, calculated across all relevant exchanges
Why: For cash-settled GOI bond futures contracts, the closing price is calculated based on the weighted average price of the contract during the last half-hour of trading on the respective exchanges. This methodology helps ensure that the closing price reflects the most recent trading activity and is not unduly influenced by short-term price fluctuations that may occur just before the market closes.
💡 Cash-settled GOI bond futures close = weighted avg price of LAST HALF HOUR across exchanges.
3. What is the limit of net long position for Foreign Portfolio Investors (FPIs) to collectively can transact in Interest Rate Futures (IRF) ?
- A. Rs. 5 billion
- B. Rs. 25 billion
- C. Rs. 50 billion ✅
- D. Rs. 100 billion
Answer: C — Rs. 50 billion
Why: As per RBI circular - Foreign Portfolio Investors (FPIs), collectively, may also transact in interest rate futures (IRF) up to a limit of net long position of INR 50 billion.
💡 FPIs collectively: net long IRF position limit = Rs 50 BILLION.
Practise all 46 Interest Rate Futures questions
Plus the full 853-question NISM V-D bank and real-feel mock exams.
Other NISM V-D topics
Investment LandscapeConcept & Role of Mutual FundsLegal StructureLegal & RegulatoryScheme Related InformationDistribution & ChannelsNAV, TER & PricingTaxationInvestor ServicesRisk, Return & PerformanceScheme PerformanceScheme SelectionBasics of DerivativesUnderstanding the IndexForwards & FuturesOptionsEquity Derivative StrategiesInterest Rates & Fixed IncomeInterest Rate DerivativesInterest Rate OptionsInterest Rate Strategies