Which of the following is the best definition of call option?
A) Risk that futures prices will not move directly with cash price hedged.
B) An option that gives the owner the right, but not the obligation, to buy an asset.
C) A contract that pays off when a credit event occurs, default by a particular company termed the reference entity, giving the buyer the right to sell corporate bonds issued by the reference entity at their face value.
D) Hedging an asset with contracts written on a closely related, but not identical, asset.
E) A financial asset that represents a claim to another financial asset.
Correct Answer:
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