UPSC Exam > UPSC Questions > Consider the following statements regarding D...
Start Learning for Free
Consider the following statements regarding Derivatives:
- It is a contract between two parties which derives its value/price from an underlying asset.
- It allows traders to earn profits by speculating on the value of the underlying asset in future.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
Consider the following statements regarding Derivatives: It is a contr...
The Securities and Exchange Board of India (SEBI) recently clarified that it was not looking to reduce retail participation in the derivatives segment.
About Derivatives:
- A derivative is a contract between two parties which derives its value/price from an underlying asset.
- The commonly used assets are stocks, bonds, currencies, commodities and market indices.
- These instruments allow investors and traders to speculate on the price movements of the underlying asset without owning it directly.
- The value of the underlying assets keeps changing according to market conditions. The basic principle behind entering into derivative contracts is to earn profits by speculating on the value of the underlying asset in future.
- Derivatives serve various purposes, including hedging against risks, providing leverage, and facilitating price discovery.
- The most common types of derivatives are:
- Futures Contracts: A futures contract is an agreement between two parties to buy or sell an asset at a predetermined price on a specific future date. The underlying asset can be commodities, financial instruments, or indices.
- Options Contracts: An options contract gives the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) on or before a predetermined expiration date.
- Swaps: Swaps are agreements between two parties to exchange cash flows based on specific financial variables. Common types of swaps include interest rate swaps, currency swaps, and commodity swaps. Swaps are often used to manage interest rate risks, currency risks, or to change the nature of a debt obligation.
- Forwards: Forwards are similar to futures contracts but are not standardized or traded on exchanges. They are customized agreements between two parties to buy or sell an asset at a specified price on a future date.
Hence both statements are correct.
Attention UPSC Students!
To make sure you are not studying endlessly, EduRev has designed UPSC study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UPSC.
|
Explore Courses for UPSC exam
|
|
Similar UPSC Doubts
Top Courses for UPSCView all
Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
Question Description
Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
Solutions for Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.
Here you can find the meaning of Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?, a detailed solution for Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Consider the following statements regarding Derivatives: It is a contract between two parties which derives its value/price from an underlying asset. It allows traders to earn profits by speculating on the value of the underlying asset in future.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? tests, examples and also practice UPSC tests.
|
|
Explore Courses for UPSC exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup