An instrument that derives its value from a specified underlying (currency, gold, stocks etc.) asset is known as a ________.

derivative

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secularization receipts

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hedge fund

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factoring

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Solution

The correct option is A derivative
A financial derivative is financial instrument that derives its price from the fluctuating returns of an underlying asset. An example of a financial derivative is a collateralized debt obligation (CDO) that derives it value from residential mortgages.

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