A client calls to say he has just read about a European option and doesn't know what it is. You would explain that it is a derivative because:
A) the currency used is generally something other than the U.S. dollar.
B) its value is based on some underlying asset.
C) it can only be exercised on the expiration date.
D) intrinsic value does not affect the premium.
Answer: B) its value is based on some underlying asset.