Futures and options,which played a part in the 2008 financial crisis,are financial instruments that:
A)are tied to physical commodities but never to other financial instruments
B)involve the current exchange of an item at a set price
C)involve the exchange of some item at a set price at some point in the past
D)allow some financial market participants to avoid risk
E)always add to the financial risk faced by those who trade them

Question

Quizplus · Accepted Answer

Futures and options allow some financial market participants, such as hedgers, to avoid risk by locking in prices for future transactions. However, misuse and overuse of these instruments by other market participants, such as speculators, contributed to the 2008 financial crisis. Therefore, option D is the best answer.

Futures and Options,which Played a Part in the 2008 Financial