How the Markets Work

Question 1

Broker

Answer 1

An individual who acts as an intermediary between a buyer and seller, usually charging a commission to execute trades. Brokers are required to seek the best execution of trades they make for clients, and if they recommend investments to clients, those investments must be suitable for the client.

Question 2

Derivatives

Answer 2

Financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value changes in relation to the price movement of the underlying stock.

Question 3

Financial Product

Answer 3

Examples of financial products include but are not limited to the following: stocks, bonds, derivatives, and currencies.

Question 4

Foreign exchange

Answer 4

The money/currency of other countries.

Question 5

Futures contract

Answer 5

An agreement to buy or sell a specific quantity of a commodity or financial instrument at a specified price on a particular date in the future.