An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Name: An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.
Brand: Quizplus
Rating: 4.8 (25 reviews)

Question

Quizplus · Accepted Answer

An option provides the right, but not the obligation, to buy or sell an asset at a predetermined price, whereas a forward contract is used to establish a fixed exchange rate for future transactions with delivery required.

An Option Is a Hedging Instrument That Allows One to Establish