Asked by Haddon Barrett on Jun 24, 2024
Verified
Which of the following is the best definition of call option?
A) Risk that futures prices will not move directly with cash price hedged.
B) An option that gives the owner the right, but not the obligation, to buy an asset.
C) A contract that pays off when a credit event occurs, default by a particular company termed the reference entity, giving the buyer the right to sell corporate bonds issued by the reference entity at their face value.
D) Hedging an asset with contracts written on a closely related, but not identical, asset.
E) A financial asset that represents a claim to another financial asset.
Call Option
A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a predetermined price within a specific time period.
- Comprehend the intent and utility of options contracts, highlighting how they vary in comparison to futures contracts.
Verified Answer
JR
jamera robinsonJun 29, 2024
Final Answer :
B
Explanation :
A call option gives the holder the right, but not the obligation, to buy an asset at a specified price within a specific time period.
Learning Objectives
- Comprehend the intent and utility of options contracts, highlighting how they vary in comparison to futures contracts.