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A junior analyst at an investment firm is examining the terms and characteristics of options and forward derivative contracts. The analyst focuses on the distinctions between linear and non-linear derivative contracts when conducting the study. Which of the following statements regarding derivative contracts would most likely be correct for the analyst to make?
A
The value of the underlying asset in a contract is determined by the value of the contract in both linear and non-linear derivatives.
B
Options are linear derivatives that give the holder the right but not the obligation to buy or sell the underlying asset.
C
Forward contracts are linear derivatives that require one party to the contract to make the payment at the pre-specified price and the other to deliver the underlying asset.
D
The value of a forward contract is determined by both the price of the underlying asset and the volatility of the price.