Derivative markets exist in order to
A)allow for the direct cash sale of common stock.
B)allow for the direct cash sale of bonds.
C)reduce the risk of exposure to price fluctuations in cash markets.
D)overcome some of the information problems involved in trades on the over-the-counter market.

Question

Quizplus · Accepted Answer

Derivative markets allow for the trading of financial instruments that derive their value from an underlying asset, such as stocks, bonds, or commodities. By trading derivatives, investors can hedge against price fluctuations in the cash market, reducing their exposure to risk.

Derivative Markets Exist in Order to