Question

What is the criticism regarding the size of the derivative market based on "notional" values?

a.

The market value is accurate and reflects true credit risk.

b.

The market value greatly exaggerates the true credit risk.

c.

The market value is underestimated.

d.

The market value is insignificant.

Answer: (b).The market value greatly exaggerates the true credit risk. Explanation:Some economists argue that the "notional" values greatly exaggerate the market value and the true credit risk faced by the parties involved.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. What is the criticism regarding the size of the derivative market based on "notional" values?

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. According to the Bank of International Settlements, what percentage of the total notional amount of OTC derivatives are interest rate related contracts?

Q. What is the primary characteristic of a forward contract regarding the exchange of money?

Q. What is a characteristic feature of forward contracts in terms of customization?

Q. How are forward contracts generally settled?

Q. What is a notable characteristic of the size and variety of forward contracts compared to other derivatives like Futures?

Q. What is the risk associated with counterparties in forward contracts due to the absence of secondary markets?

Q. What is the primary characteristic of a futures contract?

Q. How does a buyer of a futures contract differ from a seller of a futures contract?

Q. How does a futures contract differ from a forward contract?

Q. What is "Marking to Market" in the context of futures contracts?

Q. What is the essential characteristic of futures contracts regarding their terms?

Q. What are examples of commodity futures?

Q. In what form are Stock Index futures traded?

Q. What is the prime motive for futures contracts?

Q. What is the main characteristic of options contracts regarding the buyer's obligation?

Q. What is the classification of options based on the maturity date?

Q. What is the main difference between a Call Option and a Put Option?

Q. What is the strike price in an options contract?

Q. What is the key difference between Futures and Forwards regarding fulfillment of the contract on the delivery date?

Q. How is the repricing of futures contracts different from forward contracts?

Recommended Subjects

Are you eager to expand your knowledge beyond IC 89 Management Accounting? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!