A derivative is a ﬁnancial instrument whose value is determined by:
A)regulatory body such as the FTC.
B)a primitive or underlying asset.
C)hedging a risk.
D)hedging a speculation.
E)None of the above.

Question

Quizplus · Accepted Answer

A derivative's value is determined by a primitive or underlying asset, such as a commodity, currency, or stock. The value of the derivative is dependent on the value of the underlying asset. Choices A, C, and D describe the purposes or uses of derivatives rather than what determines their value.

A Derivative Is a ﬁNancial Instrument Whose Value Is Determined