Derivatives Contracts: Understanding Buyers and Sellers
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Questions and Answers

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?

  • Holding period
  • Contract size
  • Maturity-length (correct)
  • Notional amount

    • 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?

    <p>Notional amount</p> Signup and view all the answers

    What are the two main types of derivatives?

    <p>Forward commitment and Contingent claim</p> Signup and view all the answers

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