Financial Risk Manager Part 1

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Explanation:

Correct answer: B

B is true. The futures term structure for a commodity does not have to be entirely normal or entirely inverted. It can be normal (contango) at some maturities and inverted (backwardation) at others.

Why the others are false:

A: The delivery period is not simply the last trading day of the month for 24 hours. Delivery terms are contract-specific.
C: When delivery terms allow choices, the short position typically has certain delivery options, not the long position.
D: Price limits and position limits are mainly meant to reduce excessive volatility and market manipulation, not to stop arbitrageurs from narrowing spot-futures mispricing as expiration approaches.

Explanation:

Correct answer: B

B is true. The futures term structure for a commodity does not have to be entirely normal or entirely inverted. It can be normal (contango) at some maturities and inverted (backwardation) at others.

Why the others are false:

A: The delivery period is not simply the last trading day of the month for 24 hours. Delivery terms are contract-specific.
C: When delivery terms allow choices, the short position typically has certain delivery options, not the long position.
D: Price limits and position limits are mainly meant to reduce excessive volatility and market manipulation, not to stop arbitrageurs from narrowing spot-futures mispricing as expiration approaches.

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Question 21.12.1. In regard to the specifications of futures contracts and the patterns of futures prices, which of the following statements is TRUE?

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MManit

Last updated: April 18, 2026 at 11:32

The delivery period is the last trading day (24 hours) of the month

37.5%

The pattern of futures prices for a given commodity can be partly normal (aka, contango) and partly inverted (aka, backwardation)

50.0%

Whenever there is a choice about what is delivered, the party with the long position always has the right to insist on the grade, location, and delivery time

12.5%

Price limits and position limits are imposed for the purpose of preventing arbitrageurs from exploiting any price difference between the spot and futures price as the delivery period approaches