Which one of the following is not one of the advantages of Derivatives market?
Financial derivatives offer major economic advantages including risk hedging (acting as price insurance), enhanced market liquidity, price discovery, and dampening of spot…
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Which one of the following is not one of the advantages of Derivatives market?
Answer and explanation
Correct answer A
Financial derivatives offer major economic advantages including risk hedging (acting as price insurance), enhanced market liquidity, price discovery, and dampening of spot price volatility. The fact that high leverage in derivatives trading magnifies potential losses ('leveraging increases risk') is a major risk or disadvantage, not an advantage.
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UGC NET Commerce