CEO's Definition of Risk and Reasons for Risk Management in Companies

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Which party in an options contract has the right to trade the underlying asset?

Seller of the option

Option writer

Buyer of the option (correct)

Both parties

What is the price determined by both parties in an options contract known as?

Benchmark rate

Premium

Interest rate

Strike price (correct)

In a futures contract, who holds the obligation to buy/sell the underlying asset at the contract's expiration?

Option writer

Both parties

Seller of the futures contract

Buyer of the futures contract (correct)

What is a primary reason for managing risk in investment portfolios?

To diversify portfolios Signup and view all the answers

What type of risk is considered the most relevant by investors when managing their portfolios?

Systematic risk Signup and view all the answers

In capital budgeting, what is the primary focus of decision-making?

Long-term investment opportunities Signup and view all the answers

What happens if a buyer of an options contract decides not to exercise their right to trade the underlying assets?

They can pass on the exercise right after paying the premium Signup and view all the answers

What distinguishes an option contract from a futures contract?

'Option contracts have fixed cash flows, while futures have variable cash flows' Signup and view all the answers

What is the role of an option writer in an options contract?

Selling option contracts and receiving premiums Signup and view all the answers

When managing risk in their portfolios, what type of risk do corporate executives often express concern about?

Credit risk Signup and view all the answers

CEO's Definition of Risk and Reasons for Risk Management in Companies

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Questions and Answers

Which party in an options contract has the right to trade the underlying asset?

What is the price determined by both parties in an options contract known as?

In a futures contract, who holds the obligation to buy/sell the underlying asset at the contract's expiration?

What is a primary reason for managing risk in investment portfolios?

What type of risk is considered the most relevant by investors when managing their portfolios?

In capital budgeting, what is the primary focus of decision-making?

What happens if a buyer of an options contract decides not to exercise their right to trade the underlying assets?

What distinguishes an option contract from a futures contract?

What is the role of an option writer in an options contract?

When managing risk in their portfolios, what type of risk do corporate executives often express concern about?

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