A Financial Instrument Whose Value Is Based on an Underlying

question 35

Multiple Choice

A financial instrument whose value is based on an underlying security or commodity is called a/an:

• A) insurance contract
• B) employment contract
• C) enterprise contract
• D) derivative security

---

Definitions:

Systematic Risk

The risk inherent to the entire market or an entire market segment, which cannot be mitigated through diversification.

Asset Specific Risk

The risk of loss associated with a particular asset, different from market risk.

Portfolio Diversification

A risk management technique that mixes a wide variety of investments within a portfolio.

S&P/TSX 60 Index

A stock market index of 60 large companies listed on the Toronto Stock Exchange, representing leading sectors in Canada.