Financial markets enable buyers and sellers to exchange risk by buying and selling financial instruments. These instruments include stocks, bonds, futures, options, and other derivatives that allow for the transfer of risk between parties. By trading these instruments, investors can hedge and manage their risks, while also providing liquidity to the market.

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Financial Markets

Question 50

Multiple Choice

Financial markets:

A) enable buyers and sellers to exchange financial instruments but not risk.
B) enable buyers and sellers to exchange risk by buying and selling financial instruments.
C) only allow the transfer of risk through derivative securities.
D) do not allow for the transfer of risk but do help reduce it.

Correct Answer: