Which market involves the trading of derivative securities?

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BlackTom AI · Accepted Answer

The question asks which market involves the trading of derivative securities.
Option a: 'Futures and options markets' is correct because derivatives are financial instruments whose value derives from an underlying asset, and they are primarily traded in markets specifically for futures and options.
Option b: 'Primary market' refers to initial issuance of new securities (like IPOs or bond issues) and does not focus on derivatives trading; derivatives are typically traded after issuance in secondary markets, not in the primary market.
Option c: 'Secondary market' involves trading of existing securities between investors after the initial issue, which can include derivatives as well, but the phrasing of the option suggests a general equity/standard security trading context rather than specifically derivative markets; the most accurate descriptor for derivatives trading is the futures and options markets.
Option d: 'Money market' deals with short-term debt instruments and liquidity management, not with derivatives trading.
In summary, derivatives are specialized financial instruments traded in dedicated markets like futures and options markets, making option (a) the best choice among the given options.

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We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

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My home Progress Check

Which market involves the trading of derivative securities?

View Explanation

Log in for full answers

Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are​ called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which of the following is a hedging instrument? _____

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds