There Are Three Reasons Why Futures Options on Fixed-Income Securities

question 20

Multiple Choice

There are three reasons why futures options on fixed-income securities have largely supplanted options on physicals as the options vehicle used by institutional investors. Which of the below is NOT one of these three reasons?

• A) Unlike options on fixed-income securities, futures options on Treasury coupon futures do not require payments for accrued interest to be made.
• B) Futures options are believed to be "cleaner" instruments because of the reduced likelihood of delivery squeezes.
• C) In order to price any option, it is imperative to know at all times the price of the underlying instrument.
• D) None of these

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