One Key Difference Between Swaps and Option Contracts Is

question 5

Multiple Choice

One key difference between swaps and option contracts is:

• A) swaps are derivative agreements and options are not.
• B) swaps do not involve any risk and options do.
• C) options transfer risk, swaps create risk.
• D) options trade on organized exchanges and swaps do not.

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Definitions:

Degrees Of Freedom

The count of distinct values or measures that can be attributed to a statistical distribution while adhering to all restrictions.

Parameters Estimated

Quantitative values derived from statistical modeling used to represent characteristics of a population based on sample data.

Normal Population

A population distribution that follows a normal (Gaussian) curve, where all measures of central tendency (mean, median, and mode) are equal and most of the data falls close to the mean.

Significance Level

A threshold in hypothesis testing that determines the probability of rejecting a true null hypothesis, usually denoted as alpha (α).