The Decision Between Selecting a Future or an Option

question 64

Multiple Choice

The decision between selecting a future or an option:

• A) reflects a trade-off between the higher cost of using options and the extra insurance benefits that options provide.
• B) reflects the greater risk of using options and the extra insurance benefits that options provide.
• C) reflects a trade-off between the higher cost of using futures and the extra insurance benefits that futures provide.
• D) depends on whether the underlying instrument is an equity or debt instrument.

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Definitions:

Economy-Wide Experiments

Experimental approaches that investigate the outcomes of economic theories and policies on a broad scale, encompassing an entire economy.

Theories

Systematic sets of ideas intended to explain facts or phenomena, often forming the basis for further investigation or experiments.

Financial Institutions

Organizations such as banks, credit unions, and insurance companies that provide financial services, including deposits, loans, investments, and currency exchange.

Largest Bankruptcy

The biggest instance of a legal declaration by an entity that cannot repay its debts to creditors, historically significant due to its impact.