Which of the Following Features Are Shared by Futures Contracts

question 26

Multiple Choice

Which of the following features are shared by futures contracts and options?
I. They have specified expiration dates.
II. Their value is derived from changes in the value of some other asset.
III. Unprofitable futures or options can simply be allowed expire unexercised.
IV. The obligate the buyer and seller to exchange cash for the underlying asset on the expiration date.

• A) I and II only
• B) I and IV only
• C) II and III only
• D) I, II and III only

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Definitions:

Perfectly Negatively Correlated

This refers to a relationship between two variables where one variable increases as the other decreases with a correlation coefficient of -1.

Portfolio's Risk

The overall risk associated with holding a portfolio of investments, considering how the risks of the individual investments affect the portfolio as a whole.

Stand-alone Risk

Stand-alone risk refers to the risk associated with investing in a single asset or project, without considering the diversity or portfolio effects.

Risk Impacts

The potential negative consequences that uncertain events or conditions may have on an organization's ability to achieve its objectives.