The purpose of derivatives is to:
A)Increase the risk so the return is larger.
B)Eliminate risk for both parties in the transaction.
C)Postpone the risk for both parties in the transaction.
D)Transfer the risk from one person to another.

Question

Quizplus · Accepted Answer

The purpose of derivatives is to transfer the risk from one person to another. It allows one party to take on a particular risk while the other party is protected from that risk. This can be beneficial for both parties as it allows them to manage their risks more effectively. However, it can also increase the overall level of risk in the financial system if not managed properly.

The Purpose of Derivatives Is To