Question : The process of transferring ownership of a financial instrument from one party to another is known as:
Option 1: Hedging
Option 2: Clearing
Option 3: Settlement
Option 4: Derivatives trading
Correct Answer: Settlement
Solution : The correct answer is (c) Settlement.
The process of transferring ownership of a financial instrument from one party to another is known as settlement. Settlement occurs after a trade has been executed, and it involves the finalization of the transaction by transferring the ownership and associated rights of the financial instrument.Settlement includes activities such as the confirmation of trade details, verification of ownership, payment processing, and the updating of relevant records. It is a crucial component of the post-trade process, ensuring the smooth and efficient transfer of ownership between parties.
Question : A credit default swap (CDS) is a financial instrument used for:
Option 1: Hedging foreign currency risk
Option 2: Trading commodities futures
Option 3: Insuring against the default of a bond issuer
Option 4: Investing in real estate properties
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