Which of the following statement is not true about derivative contracts?
a. A long position is a bet that the number is going to fall while a short position is a bet that the number will rise in the future.
b. Derivative contract can be seen as a bet on which way the price of its underlying asset may move in the future.
c. Companies often use derivative contracts to transfer risk to another party.
d. Derivatives are often used for hedging, which aims at protecting a current financial position from potential losses.

Question

04-01-2021
Business

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Which of the following statement is not true about derivative contracts?
a. A long position is a bet that the number is going to fall while a short position is a bet that the number will rise in the future.
b. Derivative contract can be seen as a bet on which way the price of its underlying asset may move in the future.
c. Companies often use derivative contracts to transfer risk to another party.
d. Derivatives are often used for hedging, which aims at protecting a current financial position from potential losses.

Sagot :

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Andromacheidn Andromacheidn · Answer 1 · 2021-01-05T02:24:08-05:00

Answer:

a. A long position is a bet that the number is going to fall while a short position is a bet that the number will rise in the future.

Explanation:

The derivative contract is a contract in which the contract is to be done between two or more parties regarding the value i.e. depend upon the financial asset i.e. underlying. It involves the bonds, commodities, etc

So according to the given options, the option a is correct as long position is a bet in which the number is to be decline while on the other hand in the short position the number would increase

Sagot :

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