Which of the following features apply to a futures contract?
I. zero-sum game
II. derivative security
III. maturity date
IV. settlement procedure
A)I and II only
B)I and III only
C)II and III only
D)II, III, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

Futures contracts are derivative securities (II) because their value is derived from the value of an underlying asset. They have a maturity date (III) at which the contract expires. The settlement procedure (IV) is the process by which the contract is settled, either through physical delivery of the asset or cash settlement. Futures contracts are also considered a zero-sum game (I) because the gain (or loss) of one party is exactly balanced by the loss (or gain) of another party.

Which of the Following Features Apply to a Futures Contract