Skip to content

CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features

Compared with an equivalent position in the underlying asset, a derivative contract most likely:

A derivative most likely has a finite life that ends at expiration. Unlike buying the underlying, it usually needs a smaller initial outlay and gives no ownership of the asset, so the other statements describe features that derivatives lack.

  1. Arequires a larger initial cash outlay
  2. Bhas a finite life ending at expirationCorrect
  3. Cgives ownership of the underlying

Explanation

Derivatives have a defined maturity or expiration date. They usually need a smaller initial outlay than buying the underlying and do not confer ownership of it, so the other options are wrong.

Did you get it right without looking?

One question tells you little. A timed set on Derivative Instrument and Derivative Market Features shows your real accuracy, how long you take and where you lose marks.

Practise Derivative Instrument and Derivative Market FeaturesFree diagnostic mock

More Derivative Instrument and Derivative Market Features questions