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2026 Statistics

Key Facts: CCM Derivatives Exam

70%

Passing Score

SEC Sri Lanka

MCQ Questions

Exam Format

2 hours

Exam Time

Exam Duration

Act 19 of 2021

Regulatory Basis

SEC Sri Lanka

CSE Clear

CCP System

Settlement

Rs. 70,000

CME Module Fee

CME Education

The SEC Sri Lanka Certificate in Derivative Securities has a passing mark of 70% and features 60 MCQs in a 2-hour session. The Securities and Exchange Commission (SEC) Act, No. 19 of 2021 establishes the legal framework for derivatives brokers and dealers, and CSE Clear operates the CCP system. This module is essential for becoming a Registered Investment Adviser (RIA) specializing in derivatives.

Sample CCM Derivatives Practice Questions

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

1What is the primary distinguishing characteristic of a derivative security compared to an equity share or bond?

A.Its value is derived from the price of another underlying asset.

B.It represents direct ownership or equity in the issuing corporation.

C.It provides a legal claim on the physical assets of the issuer in liquidation.

D.It guarantees a fixed periodic interest payment to the investor.

Explanation: A derivative security is a financial instrument whose value is derived from or contractually linked to the price of another asset, known as the underlying asset (such as shares, bonds, commodities, or interest rates). It does not represent direct ownership or a claim on the physical assets of the issuer.

2Which of the following describes a transaction where an investor enters a derivatives contract to reduce or eliminate an existing risk exposure?

A.Hedging

B.Speculation

C.Arbitrage

D.Short selling

Explanation: Hedging is the practice of using derivative contracts to offset or reduce the risk of adverse price movements in an underlying asset that the investor already owns or is committed to trade. Speculation involves taking on risk for profit, while arbitrage exploits price discrepancies.

3An investor simultaneously buys an asset in one market and sells an identical asset in another market at a higher price to lock in a risk-free profit. What is this practice called?

A.Arbitrage

B.Speculation

C.Hedging

D.Leveraging

Explanation: Arbitrage is the simultaneous purchase and sale of an asset (or equivalent assets) in different markets to exploit price differences and lock in a riskless profit. True arbitrage requires no net capital outlay and carries no risk of loss.

4Which of the following is a key feature of exchange-traded derivatives that distinguishes them from over-the-counter (OTC) derivatives?

A.Standardized contract terms and clearing house guarantee

B.Customizable specifications tailored to individual counterparty needs

C.High degree of counterparty credit risk between buyer and seller

D.Settlement terms negotiated directly between the trading parties

Explanation: Exchange-traded derivatives are standardized contracts traded on organized exchanges, where a central clearing house acts as the counterparty to every trade, virtually eliminating individual counterparty credit risk. OTC derivatives are customized and carry bilateral credit risk.

5How does a clearing house mitigate counterparty risk in exchange-traded derivatives markets?

A.By acting as the buyer to every seller and the seller to every buyer (novation)

B.By setting maximum daily price limits to prevent asset prices from changing

C.By providing interest-free loans to retail traders to cover their losses

D.By converting all derivative contracts into physical underlying commodities

Explanation: The clearing house mitigates counterparty credit risk through novation, a legal process where it interposes itself between the original buyer and seller, becoming the buyer to every seller and the seller to every buyer. This guarantees contract performance even if one party defaults.

6Which of the following financial instruments is typically traded exclusively over-the-counter (OTC) rather than on an organized exchange?

A.Forward contracts

B.Futures contracts

C.Standardized options

D.Stock index futures

Explanation: Forward contracts are customized bilateral agreements traded exclusively in the over-the-counter (OTC) market. Futures and standardized options are exchange-traded derivatives with standardized specifications.

7In the derivatives market, what is the role of a speculator?

A.To assume price risk in search of profit from price fluctuations

B.To eliminate risk from an existing physical asset exposure

C.To exploit temporary price inefficiencies across markets for riskless profit

D.To regulate the market and establish clearing requirements

Explanation: Speculators enter the derivatives market to intentionally assume price risk that they do not otherwise have. They do so in search of profit, betting on the direction of future price changes, and in doing so, they provide liquidity to hedgers.

8Which type of derivative contract gives the buyer the right, but not the obligation, to perform a transaction at a set price?

A.Option contract

B.Forward contract

C.Futures contract

D.Swap contract

Explanation: An option contract provides the buyer with the right (but not the obligation) to buy (call) or sell (put) an underlying asset at a specified price within a specific time. Forwards, futures, and swaps represent binding obligations for both parties.

9What is the term for the leverage effect in derivatives trading?

A.The ability to control a large asset position with a relatively small amount of capital

B.The process of exchanging fixed interest rate payments for floating rate payments

C.The automatic termination of a contract when the underlying price reaches zero

D.The requirement to deliver physical commodities at the maturity of a forward

Explanation: Leverage in derivatives refers to the ability to control a large financial position using a small margin deposit or premium payment. This amplifies both potential percentage returns and potential percentage losses relative to the capital invested.

10Which of the following asset classes can serve as the underlying asset for a derivative contract?

A.Equities, fixed-income securities, foreign currencies, and physical commodities

B.Only physical commodities such as agricultural products and metals

C.Only financial assets such as stocks and government bonds

D.Only non-tangible variables such as weather indexes and interest rates

Explanation: Underlying assets for derivatives can be financial assets (equities, bonds, indices, currencies), physical assets/commodities (precious metals, oil, agricultural products), or other variables (interest rates, credit risks, weather indices). There is no restriction to physical-only or financial-only assets.

About the CCM Derivatives Exam

Specialized asset-class certification module under the SEC Sri Lanka Qualification Framework, covering futures, forwards, options, swaps, and Sri Lankan derivatives regulations under SEC Act No. 19 of 2021.

Questions

60 scored questions

Time Limit

2 hours

Passing Score

70%

Exam Fee

Rs. 1,000 (Securities and Exchange Commission of Sri Lanka)

CCM Derivatives Exam Content Outline

30%

Derivatives Markets & Forwards

Fundamentals of derivatives, exchange vs OTC, and forward pricing/payoffs

30%

Futures Contracts

Futures clearing, daily marking-to-market, margins, and hedging

25%

Options Contracts

Option payoffs, moneyness, basic option strategies, and pricing models

15%

Swaps & Regulations

Interest rate and currency swaps, SEC Act No. 19 of 2021, and CSE Clear

How to Pass the CCM Derivatives Exam

What You Need to Know

Passing score: 70%
Exam length: 60 questions
Time limit: 2 hours
Exam fee: Rs. 1,000

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CCM Derivatives Study Tips from Top Performers

1Focus on marking-to-market calculations: understand how initial and maintenance margins work, and when a margin call is triggered.

2Understand Put-Call Parity and options payoff charts. Draw the diagrams for covered calls and protective puts to visualize risk.

3Study the key provisions of the SEC Act, No. 19 of 2021, especially regarding derivatives brokers, dealers, and the role of CSE Clear as a Central Counterparty (CCP).

4In Swaps, master the net payments calculation for interest rate swaps under the fixed-for-floating model.

5Complete all 100 practice questions on this site to test your conceptual and quantitative understanding.

Frequently Asked Questions

What is the SEC Sri Lanka Certificate in Derivative Securities?

It is a specialized certification module under the SEC Sri Lanka Qualification Framework. It is designed to equip capital market professionals with the knowledge required to advise clients on forwards, futures, options, swaps, and related hedging strategies.

What is the passing score and format of the exam?

The examination requires a minimum passing score of 70%. It is a computer-based test consisting of 60 multiple-choice questions (MCQs) to be completed within 2 hours.

Are derivatives currently traded on the Colombo Stock Exchange (CSE)?

No, derivatives such as futures and options are not yet actively traded on the CSE. However, the regulatory framework has been established under the SEC Act No. 19 of 2021, and CSE Clear (Pvt) Ltd has launched a Central Counterparty (CCP) system to facilitate future derivatives trading.

How does the SEC Act No. 19 of 2021 affect derivatives in Sri Lanka?

The SEC Act, No. 19 of 2021 provides the formal legal and regulatory structure for derivatives trading. It defines derivatives intermediaries (including derivatives brokers and dealers) and outlines the regulatory requirements for clearing houses and Central Counterparties (CCPs).

What are the entry prerequisites for the CCM program?

Candidates must have passes in all subjects at the G.C.E. Advanced Level (A/L) examination, a recognized university degree, or an acceptable professional qualification (such as CIMA, ACCA, CA Sri Lanka, SLIM, or AAT).