A derivative may have zero initial cost, but potentially large positive or negative fair values later.

Name: A derivative may have zero initial cost, but potentially large positive or negative fair values later.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

It is possible for a derivative to have no initial cost, such as in the case of certain options contracts, but its fair value can fluctuate greatly depending on market conditions leading to potentially large positive or negative values later.

A Derivative May Have Zero Initial Cost, but Potentially Large