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Master Class: Derivative Products: Swaps

Swaps This is an agreement between two parties, usually institutions, to exchange cash flows according to a predefined calculation at some specified periodic intervals in the future. The calculation may be based on the future value of interest rates, foreign exchange rates or some other

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Master Class: Derivative Products: Futures

Futures Contracts These are contracts where the buyer/ holder of the contract agrees to purchase while the seller / writer of the contract agrees to deliver a specified asset at some future specified time (the exact delivery date is not specified only the delivery month)

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Derivative Products: Forwards

These are contracts where the buyer/ holder of the contract agrees to purchase while the seller / writer of the contract agrees to deliver a specified asset at some future specified time (the maturity date) for an exercise/ delivery price that is fixed today. Both

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Master Class: Derivative products: Exotic Options

Exotic Options Exotic Options can be path dependent or correlation based. Path-dependent options are dependent on the route prices of the underlying asset take through the life of the option (not just the terminal price or rate at maturity). Bermuda option This is a blend

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Master Class: Derivative Products: Vanilla products

There are three major categories of derivative instruments- options, forwards and futures, and swaps. A quick comparison of their characteristics is given in the table below: Option Forward Future Swap Downside Protection ü ü ü ü Upside Potential ü Initial Cost ü Credit Risk ü

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