Concept Check

What is a derivative?

• A contract involving two parties to trade spot

• An instrument whose value is derived from another assets' price

• An instrument which is priced by the contract

• None

Derivatives are __________ financial products for hedging risk.

What are the common underlyings used in derivative?

• Commodities

• Share

• Goodwill

• Bond

How many classes are there in financial derivatives?

• 2

• 3

• 4

• 5

If no hedger exists in the market, hedger transfers risk to __________.

Exchange-traded derivatives involves

• no liquidity

• greater transparancy

• standardized contract

• lower flexibility

Which one is a simple derivative instrument?

• Option

• Forward

• Futures

The party that has agreed to buy, take __________ position.