Futures and Options,which Played a Part in the 2008 Financial

question 24

Multiple Choice

Futures and options,which played a part in the 2008 financial crisis,are financial instruments that:

• A)are tied to physical commodities but never to other financial instruments
• B)involve the current exchange of an item at a set price
• C)involve the exchange of some item at a set price at some point in the past
• D)allow some financial market participants to avoid risk
• E)always add to the financial risk faced by those who trade them

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Definitions:

Composed

Pertains to being made up of several parts or elements.

Variance

A measure of how much values in a data set differ from the mean of the data set.

Binomial Distribution

A probability distribution that summarizes the likelihood of a value taking one of two independent states and is used for experiments that have two possible outcomes (success or failure).

P

Generally denotes probability, representing the likelihood of a particular event or outcome occurring.