A derivative is a financial instrument whose value is determined by
A) a regulatory body such as the SEC.
B) an underlying security.
C) futures and options.
D) None of these.

Question

Quizplus · Accepted Answer

A derivative's value is determined by an underlying security, which could be a stock, commodity, or currency, among other things. The value of the derivative is derived from the value of the underlying asset. Regulation by the SEC or the existence of futures and options contracts may affect the trading and use of derivatives, but they are not what determine their value.

A Derivative Is a Financial Instrument Whose Value Is Determined