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.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

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

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What is the purpose of a Credit Derivative, such as a Credit Default Swap (CDS)?

View solution

Q. What distinguishes an American Option from a European Option based on maturity date?

View solution

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

View solution

Q. What is a key characteristic that distinguishes a futures contract from a forward contract?

View solution

Q. What does a Forward contract represent in the context of financial derivatives?

View solution

Q. What are the two main categories of derivatives based on the market place?

View solution

Q. What is the primary purpose of using derivatives in financial risk management?

View solution

Q. Which of the following statements best defines Financial Risk Management?

View solution

Q. What is the basic reason for the emergence of a well-functioning derivative market in India?

View solution

Q. What has been the growth trend of derivatives market in India since June 2000?

View solution

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

View solution

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

View solution

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

View solution

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

View solution

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

View solution

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

View solution

Q. What is the prime motive for futures contracts?

View solution

Q. In what form are Stock Index futures traded?

View solution

Q. What are examples of commodity futures?

View solution

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

View solution
View All MCQs on IC 89 Management Accounting

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!

Verbal Reasoning

Sharpen your logical thinking and reasoning abilities with our Verbal Reasoning...

Enzyme Technology

Unlock the power of enzymes with our Enzyme Technology category. Explore enzyme...

Human and Cultural Diversity

Explore the rich tapestry of human societies with our Human and Cultural Diversity...

IC 89 Management Accounting

Boost your preparation for the IC 89 Management Accounting exam with our extensive...

Cost Accounting

Dive into the realm of Cost Accounting with our specialized category. Explore cost...

Biochemical Engineering

Master the synergy of biology and engineering with our Biochemical Engineering...

Genetic Engineering

Unlock the potential of Genetic Engineering with our dedicated category. Explore gene...

Chemistry

Unlock the mysteries of chemistry with our Chemistry category. Delve into the...

Financial Management and Financial Markets

Master the world of finance with our Financial Management and Financial Markets...