A derivative security can best be defined as:
A) Reducing a firm's exposure to price or rate fluctuations
B) A financial asset that represents a claim to another financial asset.
C) A plot showing how the value of the firm is affected by changes in prices or rates.
D) Short-run financial risk arising from the need to buy or sell at uncertain prices or rates in the near future.
E) Long-term financial risk arising from permanent changes in prices or other economic fundamentals.

Question

Quizplus · Accepted Answer

Derivative securities are financial instruments like futures, options, and swaps, whose value is derived from the value of an underlying asset, index, or rate. They represent a claim to another financial asset, rather than a direct claim on physical assets or equity.

A Derivative Security Can Best Be Defined As