Derivative securities are also called contingent claims because
A)their owners may choose whether or not to exercise them.
B)a large contingent of investors holds them.
C)the writers may choose whether or not to exercise them.
D)their payoffs depend on the prices of other assets.

Question

Quizplus · Accepted Answer

Derivative securities are contingent because their payoffs are based on the prices of other underlying assets. Their value is contingent upon the value of an underlying asset, such as a stock or commodity. Therefore, the holder of a derivative security has a claim on the underlying asset, but the claim is contingent upon the value of that asset.

Derivative Securities Are Also Called Contingent Claims Because