An example of a derivative security is ________.

Question

Quizplus · Accepted Answer

A call option is a derivative security because its value is derived from the underlying asset, in this case an ANZ share. The option gives the holder the right, but not the obligation, to buy the underlying asset at a certain price (the strike price) before a certain date (the expiration date). This means that the value of the call option is based on the price of the ANZ share and how much time is left until the option expires. The other choices, a common share of Telstra, a Telstra bond, and an Australian government bond, are not derivative securities as their value is not derived from another asset.

An Example of a Derivative Security Is ________