CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features
Which statement about the underlying of a derivative is most accurate?
The underlying can be an asset, a rate, or an index. Examples include equities, bonds, commodities, currencies, interest rates and stock indexes. It need not be a physical commodity or trade on an organized exchange.
- AIt must be a physical commodity
- BIt can be an asset, a rate, or an indexCorrect
- CIt must trade on an organized exchange
Explanation
Underlyings include equities, bonds, commodities, currencies, interest rates, indexes and even weather or credit events. They need not be physical or exchange-traded.
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