One Futures Contract Is Traded Where Both the Long and Short

question 4

Multiple Choice

One futures contract is traded where both the long and short parties are closing out existing positions.What is the resultant change in the open interest?

• A) No change
• B) Decrease by one
• C) Decrease by two
• D) Increase by one

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Definitions:

Equilibrium

A state in which opposing forces or influences are balanced so that no changes occur, or in a chemical context, when the rate of the forward reaction equals the rate of the backward reaction.

Energy of Activation

The minimum amount of energy that reacting species must possess in order to undergo a specified chemical reaction.

Equilibrium

A state in which the forward and reverse reactions occur at equal rates in a chemical reaction, resulting in no net change in the concentration of reactants and products.

Dynamic Equilibrium

Dynamic equilibrium occurs when the rate of forward reaction equals the rate of the reverse reaction in a chemical system, resulting in the concentrations of reactants and products remaining constant over time.