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Questions and Answers
What is the primary purpose of a derivative contract?
What is the primary purpose of a derivative contract?
- To guarantee a fixed return on investment
- To hedge against potential losses
- To facilitate speculation in the market
- To define the rights and obligations of each party (correct)
What is the term for the duration of time until a derivative contract reaches its maturity?
What is the term for the duration of time until a derivative contract reaches its maturity?
- Holding period
- Contract size
- Maturity-length (correct)
- Notional amount
What is the position held by the seller in a derivative contract?
What is the position held by the seller in a derivative contract?
- Neutral position
- Short position (correct)
- Hedged position
- Long position
What is the term for the amount of the underlying asset in a derivative contract?
What is the term for the amount of the underlying asset in a derivative contract?
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What are the two main types of derivatives?
What are the two main types of derivatives?
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