Options Contracts Contrast with Futures Contracts Because

question 16

Multiple Choice

Options contracts contrast with futures contracts because

• A)options are not traded on organized exchanges.
• B)options do not create an obligation for the owner of the instrument.
• C)options are derivatives.
• D)None of these options

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Definitions:

Perfectly Negatively Correlated

A relationship between two variables where one variable increases as the other decreases with a correlation coefficient of -1.

Global Minimum Variance Portfolio

A portfolio construction strategy aimed at minimizing the volatility of returns by selecting a combination of investments that as a whole have the lowest possible risk.

Standard Deviation

A statistical measure of the dispersion or variability of a set of values, often used to quantify the risk associated with a particular investment or portfolio.

Optimal Risky Portfolio

According to modern portfolio theory, this portfolio provides the maximum expected return for a specific risk level or minimizes the risk for a set expected return.