Derivatives Q40

0. The benefits of derivatives can result in a destabilizing consequence. Which of the following is this most likely to be?

  • Option : C
  • Explanation : The benefits of derivatives can result in excessive speculative trading and hence cause defaults on the part of creditors and speculators. A is incorrect because arbitrage tends to bring about a convergence of prices to the intrinsic value. B is incorrect because asymmetric information is not itself destabilizing.
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