Derivatives - Derivatives Section 1

A contract to purchase shares of Infosys, a technology company, at a fixed price.

An asset-backed security.

A global equity mutual fund.

A derivative is a financial instrument that derives its value based on the performance of the underlying.

Derivatives are standardized financial instruments and cannot be customized.

The performance of a derivative is derived by replicating the performance of the underlying.

They are used for risk management.

They are created in the form of legal contracts.

They are created in the spot market.

They are more transparent than over-the-counter derivatives.

All terms of the contract except the price are standardized.

They have more credit risk than over-the-counter derivatives.