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Firminy Capital Sarl: What AreDerivatives?
The fund managers of Firminy Capital Sarl inLuxembourg understand the importance ofprotecting their clients’ assets. One m...
Suppose the owner of an asset is uncertainabout the value of the product in six months.The owner opens a contract with an ...
Six months pass. If the product’s market priceis above $50, the investor benefits, becausehe or she can buy at a below-mar...
Because either the owner or the investor canlose money, there is risk involved inderivatives. However, careful use of them...
Because either the owner or the investor canlose money, there is risk involved inderivatives. However, careful use of them...
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Firminy Capital Sarl: What Are Derivatives

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Firminy Capital Sarl: What Are Derivatives

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Firminy Capital Sarl: What Are Derivatives

  1. 1. Firminy Capital Sarl: What AreDerivatives?
  2. 2. The fund managers of Firminy Capital Sarl inLuxembourg understand the importance ofprotecting their clients’ assets. One method ofreducing risk involves derivatives. Essentially,a derivative is a financial entity whose valueis determined by changes in a particularasset or group of assets.
  3. 3. Suppose the owner of an asset is uncertainabout the value of the product in six months.The owner opens a contract with an investor;they agree that the price in six months will be$50 per unit. Whatever the price, the investorhas committed to buying.
  4. 4. Six months pass. If the product’s market priceis above $50, the investor benefits, becausehe or she can buy at a below-market value. Ifthe price drops below $50, the owner benefitsby selling at a higher value.
  5. 5. Because either the owner or the investor canlose money, there is risk involved inderivatives. However, careful use of them canenhance a portfolio and protect against majorswings in prices.
  6. 6. Because either the owner or the investor canlose money, there is risk involved inderivatives. However, careful use of them canenhance a portfolio and protect against majorswings in prices.

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