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JAIIB · Accounting & Financial Management · Module D — Cost Management Accounting and Taxation

JAIIB AFM Unit 28 — Derivatives: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 2 November 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 28 — Derivatives (Module D — Cost Management Accounting and Taxation). The Mock Centre holds 25 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module D25 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Derivative = instrument whose value DERIVES from an underlying (rate/price/index) — no independent value of its own (RBI Act definition).
  2. Users: hedger (offsets an existing exposure), speculator (takes a view), arbitrageur (riskless spread).
  3. Forwards = OTC, customised, counterparty risk, settled at maturity; futures = exchange-traded, standardised, margined, marked-to-market daily, clearing house guarantees.

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
A derivative's value is:
Why (b): A derivative DERIVES its value from an underlying — equity, currency, interest rate or commodity.
Question 2 of 5
A HEDGER uses derivatives to:
Why (b): The hedger already carries a risk (an exporter's dollars, a borrower's floating rate) and takes the OPPOSITE derivative position to neutralise it.
Question 3 of 5
A CALL option gives the buyer the:
Why (b): Call = right to BUY at the strike; the buyer exercises only when profitable, losing at most the premium.
Question 4 of 5
To acquire an option, the buyer pays the seller a:
Why (b): The PREMIUM is the price of the right — the buyer's maximum possible loss and the writer's income.
Question 5 of 5
Which change will alter the value of an existing USD/INR forward contract?
Why (b): A derivative has no value of its own — its value comes from the underlying. For a USD/INR forward the underlying is the exchange rate (with the interest differential), so a change in that rate moves the contract's value.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
ForwardFuturesOTC/customised/counterparty risk vs exchange/standardised/margined
CallPutRight to buy vs right to sell
Practise all 25 questions on Unit 28. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,600+ AFM questions, the full and module mocks, Smart Revision and the Readiness Score for 18 months (₹1,299). Not sure where you stand? Sit the free 120-question mock first (all four papers, questions drawn from pages like this one, real exam screen).
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of November 2026; verify from official sources before relying on them in practice.