STAT3905/3618 Chapter 1

We buy stocks from the market at ...

• bid price

• ask price

The bid price is lower than the ask price.

• True

• False

Arbitrageurs trade derivatives to reduce their risks.

• True

• False

Derivatives traded on an OTC market have standardized terms.

• True

• False

The value of a derivative can depend on another derivative.

• True

• False

We have to pay transaction costs when trading derivatives on an exchange.

• True

• False

Trading derivatives is a zero-sum game for the two parties.

• True

• False

• Depends on the types of derivatives

Chapter 1 is

• easy

• difficult