Companies That Attempt to Exploit Inefficiencies in Various Derivative Markets

question 49

Multiple Choice

Companies that attempt to exploit inefficiencies in various derivative markets by attempting to lock in profits by simultaneously entering into transactions in two or more markets are called

• A) arbitrageurs.
• B) gamblers.
• C) hedgers.
• D) speculators.

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Definitions:

Unsystematic Risk

The risk of price change due to the unique circumstances of a specific security, as opposed to overall market movement, which can be diversified away.

Statistical Tests

Analytical procedures used to determine the significance of collected data by comparing it against a predetermined threshold or value.

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be mitigated through diversification.

Beta Value

A measure of a stock's volatility in relation to the overall market, indicating the level of risk associated with the stock.