Financial instruments whose payoffs are linked to previously issued securities are called
A)grandfathered bonds.
B)financial derivatives.
C)hedge securities.
D)reversible bonds.

Question

Quizplus · Accepted Answer

Financial derivatives are instruments whose values are derived from underlying assets, securities, or indexes. They include options, futures, swaps, and other complex securities whose payoffs are linked to previously issued securities. Derivatives have become popular tools for hedging risk, speculating on market movements, and managing portfolios, but they can also be highly leveraged and speculative, leading to significant losses if not managed carefully. Grandfathered bonds, hedge securities, and reversible bonds are not common terms in finance and do not refer to instruments with payoffs linked to previously issued securities.

Financial Instruments Whose Payoffs Are Linked to Previously Issued Securities