What are the main distinctions between a traditional financial instrument and a derivative financial instrument?

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For a traditional financial instrument an investor generally must pay the full cost while derivatives require little initial investment In addition the holder of a traditional security is exposed to all risks of ownership while most derivatives are not exposed to all risks associated with ownership in the underlying For example the intrinsic value of a call option only can increase in value Finally unlike a traditional financial instrument the holder of a derivative ...View the full answer

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