PrepLicense: HK SFC · Study notes · Paper 9
SFC LE Paper 9: Derivatives
Paper 9 covers derivatives product knowledge and practice: contract structures, pricing concepts, market participants and risk management.
1. Types of derivatives
Futures, forwards, swaps and options — their definitions, degree of standardisation and where they trade — form the classification backbone of the paper.
2. Uses of derivatives
Hedging, asset switching and profit-seeking are the three uses. Questions typically present a position and ask which instrument and direction fits.
3. Market participants
Hedgers, speculators and arbitrageurs differ in motivation and behaviour; you should be able to identify the role from a scenario.
4. Futures contract specifications
Contract size, minimum tick, last trading day and settlement method — cash or physical — must each be known.
5. Margin and daily settlement
The distinction between initial and maintenance margin, mark-to-market and what triggers a margin call are frequently examined.
6. Options fundamentals
Calls and puts, the asymmetry between buyer and writer, the split between intrinsic and time value, and the main drivers of option prices.
7. Clearing house and central counterparty
The clearing house novates itself as counterparty to every trade, removing counterparty credit risk. Understand the guarantee fund and default management process.
8. Risk management
Leverage amplifies both gains and losses; liquidity risk and basis risk are inherent. Be able to identify these in a scenario and explain mitigation.
Sources and how to use these notes
These notes are organised around the syllabus areas published by HKSI Institute and are conceptual summaries — use them to build a framework and to revise quickly before the exam. For specific provisions, numeric thresholds and question weightings, rely on the latest official HKSI study material and the SFC source texts.
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