One important reason for the existence of derivatives is that they:
A) help reduce market volatility by making speculation more difficult.
B) have valuable tax benefits.
C) contribute to market completeness.
D) are risk-free.

Question

Quizplus · Accepted Answer

Derivatives contribute to market completeness by allowing for the creation of new financial instruments that can be used for hedging, speculation, and arbitrage, thus enhancing the ability to manage risk and allocate resources efficiently.

One Important Reason for the Existence of Derivatives Is That