📊 NISM Series V-D Chapter 22 of 22 ⚖ 6 of 150 marks weightage

Ch.22: Strategies using Interest Rate Derivatives

Practice questions for NISM-Series-VD: Mutual Fund - Specialised Investment Fund Distributors Certification Examination, Chapter 22: Strategies using Exchange Traded Interest Rate Derivatives — the final chapter of the syllabus, covering the roles of Hedgers, Speculators and Arbitragers; short hedge, long hedge, portfolio duration-based hedging and hedging future borrowing with worked examples; option trading strategies (vertical spreads, straddles, strangles, covered calls, protective puts, butterfly spreads); speculative and arbitrage transactions using ETIRD; calendar and inter-bond spread trading; and the limitations of Interest Rate Derivatives for hedgers. Carries 6 out of 150 marks. The exam has 150 MCQs, 60% passing score, and −10% negative marking per wrong answer.

What You Will Learn in This Chapter

Roles of Hedgers, Speculators and Arbitragers in the Exchange Traded Interest Rate Derivatives (ETIRD) market, and how each approaches risk differently
Short hedge, long hedge, portfolio duration-based hedge ratio, and hedging future borrowing — each with worked numerical examples
Option trading strategies applied to interest rate options: bullish/bearish vertical spreads (using calls or puts), long/short straddles, long/short strangles, covered calls, protective puts, and long call butterfly spreads
Use of Interest Rate Derivatives for speculative view-based trading (long/short position in bonds, changing portfolio duration) and for arbitrage (regular arbitrage, reverse arbitrage, synthetic securities for yield enhancement)
Calendar spread and inter-bond spread trading using ETIRD, and the key limitations of Interest Rate Derivatives for hedgers (standardization, basis risk, limited availability across instruments/tenors)

Key Terms:Short HedgeLong HedgeDuration-Based Hedge RatioBull SpreadBear SpreadStraddleStrangleCovered CallProtective PutCalendar Spread

Free Sample Question

Q1MCQMediumShort Hedge

A Short Hedge is used to protect against which specific risk?

AA rise in the cash price of a fixed income security

✓A decline in the cash price of a fixed income security

CA change in the exchange's trading hours

DCurrency fluctuation only

💡 A short hedge protects against a decline in the cash price of a fixed income security — the hedger sells futures contracts, fixing the future cash price and transferring price risk to the buyer of the futures contract.

41 more questions in this chapter

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About this content: These practice questions are based on the NISM-Series-VD: Mutual Fund - Specialised Investment Fund Distributors Certification Examination Workbook published by the National Institute of Securities Markets (NISM), Mumbai (March 2026 edition). NISM is a SEBI-established institution. Questions cover Chapter 22: Strategies using Interest Rate Derivatives with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM, SEBI or AMFI. Last updated: July 24, 2026.

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← Ch.21: Exchange Traded Interest Rate Options