A Derivative Contract Is Transacted Between a Hedger and a Speculator

question 55

Multiple Choice

A derivative contract is transacted between a hedger and a speculator. What is the impact of the transaction on the risk profile of these two parties?

• A)It increases the risk to both parties.
• B)It decreases risk in both cases.
• C)It increases risk of the hedger and decreases risk of the speculator.
• D)It reduces the risk of the hedger and increases the risk of the speculator.

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Definitions:

Performance Standards

Explicit benchmarks or expectations set for tasks or job roles to measure the quality and efficiency of work.

Key Dimensions

Fundamental aspects or factors that contribute to the evaluation or analysis of a particular subject or phenomenon.

Productivity, Quality

Measures of efficiency and excellence in the performance of tasks and delivery of services or products.

Timeliness, Cost

Refers to the balance between completing tasks or delivering services promptly and managing the expenses involved efficiently.