Options:

1.( Increaase the risk of ) or ( help stabalize)

2. ( Natural Hedges) or (Nonsymmetric hedges)

3. ( Unfair) or ( Fair )

4. (Easier) or ( Harder)

5. ( Reduce) or (Raise)

6. ( More) or (Less)

Aa Aa E. 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. Speculators add capital and participants to the derivatives markets. Thus, speculators the derivatives markets. generally transfer risk rather than eliminate risk. Based on your understanding of the reasons why the derivatives markets have grown more rapidly than any other major market in recent years, complete the following statements: Analytical techniques have been developed that have made it easier to establish prices. Globalization and integrative technologies have made it for counterparties in different markets to work with each other. Globalization has increased both the importance of the currency markets and the need to the exchange rate risks associated with global trade. The Black-Scholes option Pricing Model was developed to help make a transparent basis for pricing hedges, making the counterparties comfortable with deals