Sonia Basin works as a hedge fund manager at High-Yield Investments (HYIN). While talking to a colleague, Basin poses the following question: "How does the standardization of derivative investments and designated market makers help the trade of such securities?" The best answer to Basin's question is that they: A. increase liquidity and reduce the cost of liquidity. B. guarantee the buying and selling of a derivative. C. guarantee the price at which a derivative is traded.

The correct answer is B. Through standardization and designated market makers, derivatives exchanges guarantee that derivatives can be bought and sold.The cornerstones of the exchange-traded derivatives market are the market makers and speculators. The market makers stand ready to buy at one price and sell at a higher price.

CFA Level 1 Question Of The Week - Derivatives (2) - CFA Level 1

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- Matt_AnalystPrep
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  05 Nov 2019 at 7:50 am
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  The correct answer is B.
  
  Through standardization and designated market makers, derivatives exchanges guarantee that derivatives can be bought and sold.
  
  The cornerstones of the exchange-traded derivatives market are the market makers and speculators. The market makers stand ready to buy at one price and sell at a higher price.
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