Canadian Securities Course (CSC) Practice Exam

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What does the pricing of options immediately reflect in the case of exchange-traded derivatives?

  1. Underlying asset value

  2. Issuer's credit rating

  3. Clearinghouse's assets

  4. Public prices

The correct answer is: Public prices

The pricing of options immediately reflects public prices in the case of exchange-traded derivatives because these prices are publically available and represent the current market value of the option. The other options, such as the underlying asset value, issuer's credit rating, and clearinghouse's assets may also play a role in the pricing of options, but they are not the immediate reflection as they may be subject to changes over time. Public prices, on the other hand, provide a real-time representation of the value of the option and are considered the most accurate and current factor in determining its price.

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