A derivative security is a financial asset that:
A) Reduces a firm's exposure to price fluctuations.
B) Derives its value from the government guarantee underlying the security.
C) Is valued based on its claim on another financial asset.
D) Is issued only by firms involved in the banking industry.
E) Has a value which moves inversely to the underlying asset.

Question

Quizplus · Accepted Answer

Derivative securities are financial instruments whose value is dependent on (or derived from) the value of another asset, known as the underlying asset. This includes options, futures, and swaps, among others.

A Derivative Security Is a Financial Asset That