Beruflich Dokumente
Kultur Dokumente
Presented By Ganesha.CK
Contents
Introduction
What is Derivatives
Introduction
In the financial marketplace some instruments are regarded as fundamentals,
while others are regarded as derivatives.
Financial Marketplace
Derivatives
Fundamentals
Introduction
(II)
Financial Marketplace
Options
The value of the derivative instrument is DERIVED from the underlying security
Futures
Forwards
Swaps
Underlying instrument such as a commodity, a stock, a stock index, an exchange rate, a bond, another derivative etc..
Futures
Forwards
Options
Swaps
1.Hedgers
2.Speculators
3.Arbitrageurs
4.Spreaders
Hedging:
Interest rate volatility Stock price volatility Exchage rate volatility Commodity prices volatility
VOLATILITY
Speculation:
EXTREMELY RISKY
Concepts to Understand
Short Selling:
Short selling is the selling of a security that the seller does not own. Short sellers assume the risk that they will be able to buy the stock at a more favorable price than the price at which they sold short.
Types
1. Interest rate future: Treasury bills, notes, bonds, debenture etc..
4. Daily settlement and margin : 1 Initial margin 2. Maintenance margin 3. Variation margin 5. Delivery : expiry date
standardized.
A Forward Contract underlies the same principles as a future contract, besides the aspect of non-standardization.
Example: x enter into contact on 1st October 2005 To buy 50 shares at Rs 1000 on 1st December 2005 from y x has to pay 50000 on 1st December 2005
they are unique in terms of size, expiration date, asset size of both parties.
It specifies future date of delivery and payment. It obligates the buyer and seller to delivery of assets. It specifies the price which determined presently is to be paid in future