2. Background on derivatives

Derivatives trading has been popular since the futures market for wheat was established. Since then, traders, brokers, and speculators have been involved in transactions involving derivatives, leading to the evolution of the derivatives markets.

Based on your understanding of the derivatives markets, answer the following questions.

The was an early marketplace for the buying and selling of futures contracts.

occur when aggregate risk can be reduced by derivatives transactions between counterparties.

Which of the following are reasons why the derivatives markets have grown more rapidly than any other major market in recent years? Check all that apply.

Reason
Analytical techniques have been developed that have made it easier to establish fair and transparent prices.
Computers and electronics have made it easier for the markets counterparties to work with each other.
Globalization has increased both the importance of the currency markets and the need to reduce the exchange rate risks associated with global trade.
After the 2008 financial crisis in the United States, it became legal for institutional investors to participate in the derivatives markets.