What does a 'commodities derivative financial instrument' exclude?
Understand the Problem
The question is asking to identify what is not included in the definition of a 'commodities derivative financial instrument' from the provided options, which involves understanding the characteristics and classifications of financial instruments in relation to commodities.
Answer
Excludes assets with intrinsic cash value traded on an exchange.
A 'commodities derivative financial instrument' excludes assets that have intrinsic cash value and are traded on an exchange like a stock market.
Answer for screen readers
A 'commodities derivative financial instrument' excludes assets that have intrinsic cash value and are traded on an exchange like a stock market.
More Information
Commodities derivatives rely on the value of underlying assets and are generally used for hedging risks or speculative purposes rather than being direct investments in the actual commodities.
Tips
A common mistake is assuming derivatives have intrinsic cash value like stocks, but they actually derive their value from other assets.
Sources
- What Is an Excluded Commodity (Case Study) - Investopedia - investopedia.com
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