Derivatives - Derivatives Section 2
1. Which of the following statements regarding the pricing of derivatives is most accurate?
- Option : A
- Explanation : A hedge portfolio is formed that eliminates arbitrage opportunities and implies a unique price for the derivative.
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- Option : C
- Explanation : Risk-neutral investors neither give nor receive a risk premium because they have no feelings about risk.
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3. Which of the following statements is least accurate?
- Option : A
- Explanation : Clearing houses do not restrict arbitrage transactions.
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4. The interest rate used in the pricing of forward contracts:
- Option : A
- Explanation : The forward price is fixed at the start, and the value starts at zero and then changes.
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5. Which of the following statements about a forward contract is most accurate?
- Option : A
- Explanation : The forward price is fixed at the start, and the value starts at zero and then changes.
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