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The sophisticated pricing model used by a bank revealed that some of the financial derivatives being traded in the market were remarkably underpriced. Seeing this,

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The sophisticated pricing model used by a bank revealed that some of the financial derivatives being traded in the market were remarkably underpriced. Seeing this, one of the traders bought as much as he could of these derivatives. What is the potential source of risk in this scenario? The trader is blindly trusting the pricing model. Financial derivatives should not be bought because they are risky instruments. Financial derivatives should not be bought because they are highly volatile. None of the above

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