Which type of contract is unique in that it protects the owner against unfavorable movements in the prices or rates while allowing the owner to benefit from favorable movements?
A) Interest rate swap
B) Forward contract
C) Option
D) Futures contract

Question

Quizplus · Accepted Answer

Options are unique financial instruments that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date. This characteristic allows the owner of the option to benefit from favorable price movements while being protected against unfavorable movements, as they are not obligated to execute the contract if it would result in a loss.

Which Type of Contract Is Unique in That It Protects