The criticism of futures contracts that their introduction will increase the price volatility of the underlying asset in the cash market is referred to as:
A) Asset volatility hypothesis.
B) Speculation.
C) Destabilization hypothesis.
D) Hedging.
E) None of the above.

Question

Quizplus · Accepted Answer

The criticism that the introduction of futures contracts will increase the price volatility of the underlying asset in the cash market is referred to as the Destabilization hypothesis. This hypothesis suggests that futures trading could lead to more speculative trading, which in turn could increase volatility in the underlying cash market.

The Criticism of Futures Contracts That Their Introduction Will Increase