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Question : Which of the following is an example of a derivative instrument?

Option 1: Treasury bills
  

Option 2: Common stocks
  

Option 3: Options contracts

   

Option 4: Corporate bonds


Team Careers360 15th Jan, 2024
Answer (1)
Team Careers360 17th Jan, 2024

Correct Answer: Options contracts

   


Solution : The correct answer is (c) Options contracts.

Options contracts are an example of derivative instruments. Derivatives are financial instruments whose value is derived from an underlying asset or benchmark. They are often used for hedging, speculation, or managing risk. Options contracts give the holder the right, but not the obligation, to buy (call option) or sell (put option) a specified underlying asset at a predetermined price (strike price) within a specific period of time. Options are commonly traded in options markets, and they can be based on various underlying assets such as stocks, commodities, currencies, or indexes.

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