18. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange.
19. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.
20. Some of the most popular assets on which futures contracts are available are equity stocks, indices, commodities and currency.
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22. They can be regarded as portfolio of forward contracts.
23. The two commonly used Swaps are- i) Interest Rate Swaps: - A interest rate swap entails swapping only the interest related cash flows between the parties in the same currency. ii) Currency Swaps: - A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and after a specified period of time, to give back the original amount swapped.
27. Options… The owner of the option has option to sell or buy assets at a given price on or before given date . Options Put Option Call Option A right to sell the underlying assets , not a obligation A right to buy the underlying assets , not a obligation
28. American Option An option that may be exercised on any trading day on or before expiry . European Option An option that may only be exercised on expiry date
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34. Future price- the price at which the future contracts trades in future markets.
35. Strike price- the price specified in the option contract
36. Expiry date- the date specified in future and option contracts.
37. Contract size- the amount of assets that has to be delivered under one contract.