The Main Disadvantage of Futures Contracts as Compared to Options

question 113

Multiple Choice

The main disadvantage of futures contracts as compared to options on futures contracts is that futures

• A) remove the possibility of gains.
• B) increase the transactions cost.
• C) are not as effective a hedge.
• D) do not remove the possibility of losses.

Understand the effects of skewed distributions on measures of central tendency.

Construct and interpret bar graphs.

Identify measures of central tendency and measures of variation.

Assess statistical significance of sample differences.

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Definitions:

Prime Interest Rate

The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark in the economy.

Time Series

A sequence of data points recorded or measured at successive times, usually at uniform intervals.

High Temperature

A state of matter or environment that possesses a temperature significantly above the norm or average.

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes (scenarios), thereby helping decision-makers to anticipate and manage change.