Derivatives Can Be Used to Reduce Risk, but They Also

question 36

True/False

Derivatives can be used to reduce risk, but they also can be a source of risk in themselves.

---

Definitions:

Economies of Scope

Cost advantages that enterprises obtain due to efficiency improvements gained by producing a wider variety of goods or services.

Joint Cost Function

A cost function that describes the total cost of producing multiple products together, where the costs cannot be separated for each product.

Economies of Scope

Cost advantages that enterprises obtain due to a broad scope of operations or the variety of products and services offered.

Cost Function

A mathematical relation that describes how the total cost of producing a good or service varies with the level of output.