8006 Exam Dumps | A refiner may use which of the following instruments to simultaneously protect against a fall in the

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Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition
PRMIA.8006.v2021-04-25.q101
Question 97

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Question 97/101

A refiner may use which of the following instruments to simultaneously protect against a fall in the prices of its products and a rise in the prices of its inputs:

A. crude oil swaps

B. options on the crack spread

C. crude oil futures

D. calendar spread options

Correct Answer: B

Explanation
The crack spread is the difference between the price of refined products and crude oil. An option on the crack spread can protect a refiner from both a fall in the price of its output and a rise in the price of its inputs.
Calendar spreads are options with different maturities. Crude oil futures and swaps only protect against an adverse change in the price of crude, and not that of refined products. Choice 'b' is the correct answer.

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