Derivative securities can be used
A) By investors in the same way as the underlying security
B) To modify the risk and expected return characteristics of existing investment portfolios
C) To duplicate cash flow patterns for arbitrage opportunities
D) All of the above
E) None of the above

Question

Quizplus · Accepted Answer

Derivative securities can be used in all of the ways mentioned in the options A, B, and C. Investors can use derivatives to gain exposure to the underlying security, modify the risk-return profile of their portfolios, and create arbitrage opportunities by duplicating cash flows. Therefore, option D is the correct answer.

Derivative Securities Can Be Used