Derivatives - Derivatives Section 1
1. Which of the following is not a derivative?
- Option : C
- Explanation : Mutual funds do not transform the value of a payoff of an underlying asset; they merely pass those payoffs through to their holders. Hence they are not derivatives.
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2. Which of the following statements is most likely to be correct about derivatives?
- Option : A
- Explanation : The value of a derivative is based on the performance of the underlying.
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3. Which of the following statements about derivatives is least accurate?
- Option : B
- Explanation : Derivatives have high degrees of leverage.
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4. Which of the following statements about derivatives is not true?
- Option : C
- Explanation : Derivatives are not created in the spot market, which is where the underlying trades
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5. Which of the following statements about exchange-traded derivatives is least accurate?
- Option : C
- Explanation : Exchange-traded contracts have less credit risk than OTC derivatives.
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