Question

__________ is an instrument, which is embedded in another contract known as host contract.

a.

Embedded Derivative

b.

Commodity Derivative

c.

Over the Counter Derivative

d.

Exchange Traded Derivatives

Posted under IC 89 Management Accounting

Answer: (a).Embedded Derivative Explanation:An embedded derivative is an instrument that is embedded in another contract, known as the host contract. This means that the embedded derivative is not a standalone contract but is part of another financial instrument. The host contract could be various financial instruments such as debt or equity instruments, leases, insurance contracts, or sale/purchase contracts. The purpose of an embedded derivative is often to modify the cash flows or risk profile of the host contract.

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Q. __________ is an instrument, which is embedded in another contract known as host contract.
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