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What are some examples of derivatives?
What are some examples of derivatives?
- Stocks and bonds
- Options and futures contracts (correct)
- Real estate and commodities
- Mutual funds and ETFs
How are derivatives classified?
How are derivatives classified?
- By the industry sector, financial statements, and credit rating
- By the type of underlying asset, relationship with the underlying asset, market of trade, and complexity (correct)
- By the country of origin, market capitalization, and liquidity
- By the financial institution, regulatory body, and investment strategy
What is one purpose of using derivatives?
What is one purpose of using derivatives?
- Gain leverage and make a profit if the value of the underlying asset moves as expected (correct)
- Stabilize the market and eliminate price volatility
- Increase the liquidity of the underlying asset and reduce transaction costs
- Guarantee a fixed rate of return and minimize investment risk
What does OTC stand for in the context of derivatives trading?
What does OTC stand for in the context of derivatives trading?
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What characteristic can make a derivative more complex?
What characteristic can make a derivative more complex?
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What is the main purpose of using futures contracts?
What is the main purpose of using futures contracts?
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Where are futures contracts and physical commodities typically traded?
Where are futures contracts and physical commodities typically traded?
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What happens to the price of futures and the price of the underlying commodity as the maturity date approaches?
What happens to the price of futures and the price of the underlying commodity as the maturity date approaches?
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