In Reference to the Derivatives Market,a "Speculator

question 1

Multiple Choice

In reference to the derivatives market,a "speculator":

• A) attempts to profit from a change in the futures price.
• B) wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position.
• C) plays a zero-sum game.
• D) passes off the risk of price variation to other player, who is better able, or at least more willing, to bear this risk.

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Definitions:

Price of a Book

The amount of money required to purchase a book, determined by factors like demand, production costs, and publisher pricing strategies.

Indifference Curves

Graphical representations that show combinations of two goods among which a consumer is indifferent, meaning each combination gives the consumer the same satisfaction or utility.

Budget Constraints

The limitations on the consumption bundles that a consumer can afford, given their income and the prices of goods and services.

Relative Prices

The price of one good or service compared to another, usually expressed as a ratio.