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100+ Free IFoA SP6 Practice Questions

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2026 Statistics

Key Facts: IFoA SP6 Exam

3h15m

Exam Duration

IFoA SP6 syllabus

50%

Pricing and Valuation Weight

IFoA SP6 syllabus

4

Syllabus Groups

IFoA SP6 syllabus

~200 hrs

Indicative Study Hours

IFoA guidance

ST6

Predecessor Subject

IFoA curriculum

Written

Exam Format

IFoA SP6 syllabus

SP6 is a 3 hour 15 minute online written paper of short and long-answer questions, not a multiple-choice exam, so this free bank provides 100 MCQs as technical-knowledge prep. The current IFoA 2026 syllabus weights the four groups as Derivative markets 5%, Derivative types and uses 20%, Derivative pricing and valuation methods including interest rate models 50%, and Management of derivatives 25%. SP6 replaced the former ST6 subject and assumes the CM2 material as background. The IFoA sets the pass mark each session rather than publishing a fixed percentage, and around 200 study hours are typical.

Sample IFoA SP6 Practice Questions

Try these sample questions to test your IFoA SP6 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1A forward contract on a non-dividend-paying stock has 9 months to maturity. The stock trades at 50 and the continuously compounded risk-free rate is 4% per annum. What is the theoretical forward price?
A.48.52
B.50.00
C.51.52
D.52.00
Explanation: The forward price of a non-income asset is F = S0 e^(rT) = 50 e^(0.04 x 0.75) = 50 e^(0.03) = 51.52. The forward price exceeds spot because the holder of the long forward defers payment and forgoes the risk-free return on the cash.
2Which feature most clearly distinguishes an exchange-traded futures contract from an over-the-counter forward contract?
A.Futures are standardised and subject to daily margining through a clearing house, whereas forwards are bespoke with counterparty credit exposure
B.Forwards eliminate counterparty risk because they are guaranteed by an exchange
C.Futures cannot be used to hedge while forwards can
D.Futures are settled only at maturity whereas forwards are marked to market daily
Explanation: Futures are standardised in size, maturity and quality, trade on an exchange, and are guaranteed by a clearing house that requires initial and variation margin (daily marking to market). Forwards are customised OTC agreements that carry bilateral counterparty credit risk.
3In a plain vanilla interest rate swap, party A pays a fixed rate and receives a floating rate (e.g. SOFR) on the same notional. What is party A's primary economic exposure?
A.A benefits if floating rates rise above the fixed rate
B.A benefits if floating rates fall below the fixed rate
C.A has no rate exposure because the notional is never exchanged
D.A is exposed only to changes in the notional principal
Explanation: The fixed-rate payer (floating receiver) gains when floating rates rise, because it continues paying the locked-in fixed coupon while receiving the higher floating leg. This is economically similar to being short fixed-rate bonds and long a floating-rate note.
4An investor holds a European call option with strike 100. At expiry the underlying is worth 92. What is the payoff and what has happened to the premium paid?
A.Payoff 8; premium recovered
B.Payoff -8; investor must pay the difference
C.Payoff 0; the premium paid is a sunk loss
D.Payoff 100; the option is exercised at strike
Explanation: A call payoff is max(ST - K, 0) = max(92 - 100, 0) = 0. The holder simply lets the out-of-the-money option lapse. The premium originally paid is lost but is not an additional cost; option buyers cannot lose more than the premium.
5Put-call parity for European options on a non-dividend-paying stock states that:
A.c + Ke^(-rT) = p + S0
B.c - p = Ke^(-rT) - S0
C.p - c = S0 - Ke^(-rT)
D.c + p = S0 + Ke^(-rT)
Explanation: Put-call parity is c + Ke^(-rT) = p + S0. A portfolio of a long call plus cash equal to the present value of the strike replicates a long put plus the stock. Any deviation creates an arbitrage opportunity.
6A trader sets up a bull call spread: long a call struck at 100 and short a call struck at 110, both same maturity. What is the maximum profit, ignoring the time value of the net premium?
A.10 minus the net premium paid
B.The net premium received
C.110
D.Unlimited
Explanation: A bull call spread caps the upside. Maximum payoff is the difference in strikes, 110 - 100 = 10, achieved when the underlying is at or above the higher strike. Subtracting the net premium paid gives the maximum profit. Selling the higher-strike call reduces cost but caps gains.
7What is the main purpose of an initial margin requirement imposed by a futures clearing house?
A.To provide a buffer against a participant's potential one-day adverse price move and reduce default risk to the clearing house
B.To guarantee the trader a minimum profit
C.To replace the need for daily settlement
D.To pay the broker's commission upfront
Explanation: Initial margin is collateral posted to cover potential losses over the period it would take to close out a defaulting member, protecting the clearing house and other participants. Variation margin then tops this up daily as positions are marked to market.
8An asset pays a known continuous dividend yield q. The forward price for maturity T is given by:
A.F = S0 e^((r-q)T)
B.F = S0 e^(qT)
C.F = S0 e^(-rT)
D.F = S0 e^((r+q)T)
Explanation: With a continuous dividend yield q, the cost-of-carry net of income is r - q, so F = S0 e^((r-q)T). The dividend yield reduces the forward price because the holder of the asset receives income the forward holder does not.
9A currency forward on GBP/USD is priced using covered interest rate parity. If UK interest rates are higher than US interest rates, the forward USD-per-GBP rate will be:
A.Lower than the spot rate (GBP at a forward discount)
B.Equal to the spot rate
C.Indeterminate without volatility data
D.Higher than the spot rate (GBP at a forward premium)
Explanation: Under covered interest parity, the currency with the higher interest rate trades at a forward discount. If UK rates exceed US rates, GBP sells forward at a discount, so the forward USD-per-GBP rate is below spot. This prevents riskless arbitrage between money markets and the FX forward.
10The value of a long forward contract at time t, with delivery price K agreed at inception and current forward price Ft, is:
A.(Ft - K) e^(-r(T-t))
B.(K - Ft) e^(-r(T-t))
C.Ft - K with no discounting
D.S0 - K
Explanation: The mark-to-market value of a long forward is the present value of the gain locked in: (Ft - K) e^(-r(T-t)). At inception Ft = K so the value is zero; as the current forward price moves above K the long position gains value.

About the IFoA SP6 Exam

IFoA SP6 Financial Derivatives Specialist Principles develops the ability to understand financial derivatives and their uses, the markets they trade in, methods of valuing them, and the assessment and management of risks in a derivative portfolio, building on CM2 to a higher level of detail.

Assessment

Online written paper combining short and long-answer questions requiring calculations, derivations and reasoned commentary

Time Limit

3 hours 15 minutes

Passing Score

The pass mark is set by the IFoA Board of Examiners for each session and is not published as a fixed percentage

Exam Fee

Set per session in the IFoA exam fees schedule (Institute and Faculty of Actuaries (IFoA))

IFoA SP6 Exam Content Outline

5%

Derivative Markets

Understand the structure and purpose of derivative markets, the differences between exchange-traded and OTC instruments, the role of clearing houses, initial and variation margin, and the main market participants.

20%

Derivative Types and Uses

Analyse forwards, futures, swaps and options, their payoff profiles, put-call parity, cost-of-carry pricing of forwards, and their use for hedging, speculation, equitisation and efficient portfolio management.

50%

Derivative Pricing and Valuation Methods (incl. interest rate models)

Apply no-arbitrage and risk-neutral valuation, binomial trees, stochastic calculus and Ito's lemma, the Black-Scholes model and PDE, the Greeks, numerical methods such as Monte Carlo and finite differences, and short-rate and forward-rate interest-rate and credit derivative models.

25%

Management of Derivatives

Manage derivative portfolios through delta, gamma and vega hedging, identify market, credit and liquidity risk, compute and critique Value at Risk and Expected Shortfall, use stress testing, and apply derivatives within actuarial work and the regulatory framework.

How to Pass the IFoA SP6 Exam

What You Need to Know

  • Passing score: The pass mark is set by the IFoA Board of Examiners for each session and is not published as a fixed percentage
  • Assessment: Online written paper combining short and long-answer questions requiring calculations, derivations and reasoned commentary
  • Time limit: 3 hours 15 minutes
  • Exam fee: Set per session in the IFoA exam fees schedule

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IFoA SP6 Study Tips from Top Performers

1Treat the pricing and valuation group as the centre of gravity. It is 50% of the syllabus, so master no-arbitrage arguments, risk-neutral valuation, binomial trees and Black-Scholes until the setups are automatic.
2Do not just memorise the Greeks; practise constructing delta- and gamma-neutral portfolios and explaining in words why a hedge needs rebalancing, since the written paper rewards reasoning.
3Build fluency with interest-rate and credit derivatives. Caps, floors, swaptions, short-rate models such as Vasicek and CIR, and CDS pricing all appear and reward clear, structured answers.
4Practise commenting on the weaknesses of models and measures, for example the failings of Value at Risk and the assumptions behind Black-Scholes, because SP6 questions often ask for critical evaluation, not just calculation.
5Always link techniques back to actuarial use. Be ready to discuss LDI, embedded guarantees, longevity swaps, hedging programmes and the regulatory context such as Solvency II and EMIR.

Frequently Asked Questions

Is IFoA SP6 a multiple-choice exam?

No. SP6 is an online written paper of short and long-answer questions that require calculations, derivations and reasoned commentary. This free bank provides 100 multiple-choice questions as technical-knowledge prep to reinforce the underlying concepts before tackling full written questions.

How long is the IFoA SP6 exam?

SP6 is a 3 hour 15 minute paper. Because it is calculation-heavy and requires written explanation, candidates need both technical fluency in derivatives pricing and disciplined exam-writing and time management.

What topics are weighted most heavily in SP6?

Derivative pricing and valuation methods, including interest rate models, is the largest group at 50% of the syllabus. Management of derivatives is 25%, derivative types and uses is 20%, and derivative markets is 5%.

What is the passing score for SP6?

The IFoA does not publish a fixed pass percentage. The Board of Examiners sets the pass mark for each session after reviewing the paper and candidate performance, so the required standard is benchmarked rather than a static cut score.

What knowledge do I need before SP6?

SP6 builds on CM2 (Financial Engineering and Loss Reserving) and develops it to a higher level of detail. Familiarity with no-arbitrage pricing, Black-Scholes, stochastic calculus and the Greeks is assumed as a foundation.

Did SP6 replace an older actuarial subject?

Yes. Under the IFoA 2019 curriculum the Specialist Principles subjects replaced the equivalent Specialist Technical subjects, and Subject SP6 Financial Derivatives replaced the former Subject ST6.