PB601 Investment Management
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This document defines and compares futures contracts and forward contracts. A futures contract is a standardized agreement traded on an exchange to buy or sell an asset at a predetermined price and date. A forward contract is a private agreement between two parties for the purchase or sale of an asset at a specified future date. The document outlines the functions of hedging, speculating, and market making for futures and forward users. It provides examples of different types of futures contracts including commodities, equities, currencies, metals, and financial futures. The main differences between futures and forward contracts are that futures have no default risk, daily profit/loss settlement, and public trading, while forwards pose a default risk and profits/losses are realized at expiry through
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Financial derivatives
Derivatives are financial instruments whose value is based on an underlying asset such as commodities, interest rates, indices, or share prices. They are used to manage risk exposure in volatile markets through hedging and speculation. The main players in derivatives markets are hedgers who seek to reduce risk, arbitrageurs who profit from pricing discrepancies, and speculators who take positions based on their expectations of future price movements. Common types of derivatives include swaps, options, futures, and forwards, which allow parties to take long or short positions on assets.
Derivatives-B.V.Raghunandan
Derivatives are financial instruments whose value is based on an underlying asset. The three main types of derivatives are forwards, futures, and options.
Forwards are over-the-counter contracts where two parties agree to buy or sell an asset at a set price on a future date. Futures are exchange-traded contracts with standardized terms for delivery of an asset on a future date. Options give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before expiration.
Derivatives provide benefits like hedging, speculation, and accessing markets. They derive their value from underlying assets like stocks, commodities, currencies, or interest rates. Forwards have custom terms
forward and future contract
A forward contract is a customized agreement between two parties to buy or sell an asset at a predetermined future date and price, with no upfront payment required. It is used primarily for hedging and has counterparty risk.
A futures contract is a standardized agreement traded on a futures exchange to buy or sell an underlying asset at a predetermined future date and price, with an initial margin payment required. It is used more for speculation and has low counterparty risk due to clearing house guarantees.
The key differences are that forward contracts are customized over-the-counter agreements while futures contracts are standardized exchange-traded agreements, with futures requiring an initial margin and having a clearing house to reduce counterparty risk.
Financial Derivatives
Derivatives are financial contracts whose value is based on an underlying asset such as a commodity, bond, currency or stock. They can be used for hedging risks from price movements, speculating on prices, or gaining exposure to markets. Common derivatives include forwards, futures, options, and swaps. Most are traded over-the-counter or on exchanges. Derivatives are one of the three main categories of financial instruments along with stocks and debt.
characterstics of derivative market instruments power point presentation
This document discusses various derivative market instruments, including their characteristics. It describes forward contracts as bilateral agreements to buy or sell an asset at a future time for a set price, exposing the parties to counterparty risk. Futures contracts are exchange-traded agreements to buy or sell an asset at a future date for a set price. Options contracts give the buyer the right, but not obligation, to buy or sell an asset at a strike price by an expiration date in exchange for an upfront premium. Swaps involve the exchange of financial instruments between two parties based on a net payment amount at settlement dates until the final termination date.
Forward contracts
This document discusses forward contracts and prepaid forward contracts on stocks. It defines forward contracts and prepaid forward contracts, and describes three methods for pricing prepaid forward contracts: by analogy, by discounted present value, and by arbitrage. It also discusses how to price prepaid forwards when the underlying stock pays discrete or continuous dividends. The document explains that forward contracts allow fixing a future price without an upfront payment, and the forward price is the future value of the prepaid forward price discounted by the risk-free rate minus the dividend yield. Finally, it notes that while the forward price predicts the expected future spot price, it systematically underpredicts it due to the risk premium on the underlying stock.
Derivative - Introduction
Derivative, Types of Derivative, Risk involved in derivative contracts, Commonly Used Terms, Long positions, Short Position, Spot Contract, Expiration, Market Maker, Bid Ask Spread.
Financial Derivatives
This document provides an overview of financial derivatives, including:
- A derivative is a financial instrument whose value is derived from an underlying asset. Common types of derivatives include forwards, futures, options, and swaps.
- Derivatives can be traded over-the-counter (OTC) between two parties or on an exchange.
- In Pakistan, derivatives on financial assets trade on the Pakistan Stock Exchange, while commodity derivatives trade on the Pakistan Mercantile Exchange.
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Financial derivatives
Derivatives are financial instruments whose value is based on an underlying asset such as commodities, interest rates, indices, or share prices. They are used to manage risk exposure in volatile markets through hedging and speculation. The main players in derivatives markets are hedgers who seek to reduce risk, arbitrageurs who profit from pricing discrepancies, and speculators who take positions based on their expectations of future price movements. Common types of derivatives include swaps, options, futures, and forwards, which allow parties to take long or short positions on assets.
Derivatives-B.V.Raghunandan
Derivatives are financial instruments whose value is based on an underlying asset. The three main types of derivatives are forwards, futures, and options.
Forwards are over-the-counter contracts where two parties agree to buy or sell an asset at a set price on a future date. Futures are exchange-traded contracts with standardized terms for delivery of an asset on a future date. Options give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before expiration.
Derivatives provide benefits like hedging, speculation, and accessing markets. They derive their value from underlying assets like stocks, commodities, currencies, or interest rates. Forwards have custom terms
forward and future contract
A forward contract is a customized agreement between two parties to buy or sell an asset at a predetermined future date and price, with no upfront payment required. It is used primarily for hedging and has counterparty risk.
A futures contract is a standardized agreement traded on a futures exchange to buy or sell an underlying asset at a predetermined future date and price, with an initial margin payment required. It is used more for speculation and has low counterparty risk due to clearing house guarantees.
The key differences are that forward contracts are customized over-the-counter agreements while futures contracts are standardized exchange-traded agreements, with futures requiring an initial margin and having a clearing house to reduce counterparty risk.
Financial Derivatives
Derivatives are financial contracts whose value is based on an underlying asset such as a commodity, bond, currency or stock. They can be used for hedging risks from price movements, speculating on prices, or gaining exposure to markets. Common derivatives include forwards, futures, options, and swaps. Most are traded over-the-counter or on exchanges. Derivatives are one of the three main categories of financial instruments along with stocks and debt.
characterstics of derivative market instruments power point presentation
This document discusses various derivative market instruments, including their characteristics. It describes forward contracts as bilateral agreements to buy or sell an asset at a future time for a set price, exposing the parties to counterparty risk. Futures contracts are exchange-traded agreements to buy or sell an asset at a future date for a set price. Options contracts give the buyer the right, but not obligation, to buy or sell an asset at a strike price by an expiration date in exchange for an upfront premium. Swaps involve the exchange of financial instruments between two parties based on a net payment amount at settlement dates until the final termination date.
Forward contracts
This document discusses forward contracts and prepaid forward contracts on stocks. It defines forward contracts and prepaid forward contracts, and describes three methods for pricing prepaid forward contracts: by analogy, by discounted present value, and by arbitrage. It also discusses how to price prepaid forwards when the underlying stock pays discrete or continuous dividends. The document explains that forward contracts allow fixing a future price without an upfront payment, and the forward price is the future value of the prepaid forward price discounted by the risk-free rate minus the dividend yield. Finally, it notes that while the forward price predicts the expected future spot price, it systematically underpredicts it due to the risk premium on the underlying stock.
Derivative - Introduction
Derivative, Types of Derivative, Risk involved in derivative contracts, Commonly Used Terms, Long positions, Short Position, Spot Contract, Expiration, Market Maker, Bid Ask Spread.
Financial Derivatives
This document provides an overview of financial derivatives, including:
- A derivative is a financial instrument whose value is derived from an underlying asset. Common types of derivatives include forwards, futures, options, and swaps.
- Derivatives can be traded over-the-counter (OTC) between two parties or on an exchange.
- In Pakistan, derivatives on financial assets trade on the Pakistan Stock Exchange, while commodity derivatives trade on the Pakistan Mercantile Exchange.
Forward and Futures Contract
Derivatives are financial instruments whose value is derived from an underlying asset. Forward and futures contracts are types of derivatives that allow parties to lock in a price today to purchase or sell an asset in the future. A forward contract is a customized over-the-counter agreement between two parties, while a futures contract is traded on an exchange with standardized terms. Both require mark-to-market adjustments and margin payments to mitigate risks from price fluctuations until contract settlement.
Derivative ppt
Derivatives derive their value from underlying assets such as equities, debt, currencies, and indices. Derivatives contracts include forwards, futures, options, and swaps. Forwards and futures are agreements to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows of an underlying asset. Derivatives can be used for hedging risk, speculation, or arbitrage opportunities between markets.
Derivatives
Derivatives are financial instruments whose value is based on an underlying asset such as a stock, bond, commodity, or currency. There are three main types of derivatives: futures and forwards, which are contracts to buy or sell an asset on a future date; options, which give the owner the right but not obligation to buy or sell an asset; and swaps, which involve exchanging cash flows of one party's financial instrument for those of another party. Derivatives offer benefits like speculation, hedging risk, leverage, and flexibility, but also carry risks such as credit risk, potential for crimes, and impacting the leverage of an economy's debt.
Forward and futures contracts
Futures and forward contracts lock in a price today for the purchase or sale of an asset in the future. Futures contracts are standardized and traded on exchanges, while forwards are negotiated privately. Both involve a short party committing to sell an asset and a long party committing to buy, with payment occurring at maturity. Margin requirements for futures ensure neither party defaults, as positions are marked to market daily and cash added or subtracted to offset price changes. Swaps involve exchanging cash flows, most commonly interest rate payments, with plain vanilla swaps exchanging fixed for floating rate obligations.
Derivatives
The document discusses various types of derivatives instruments used to manage financial risk, including forwards, futures, options, and swaps. It provides examples of how these derivatives are used to hedge risks related to commodities, interest rates, currencies, equities, indexes, and other underlying assets. The key types of derivatives discussed are over-the-counter contracts and exchange-traded contracts, along with examples of each like forwards, futures, and options.
Unit 1 financial derivatives
The document discusses derivatives, which are financial instruments derived from underlying assets like stocks, bonds, currencies, and commodities. Derivatives include options, futures, forwards, and swaps. They allow investors to hedge risk or speculate. Derivatives gain value based on fluctuations in the underlying asset and are used for both risk management and investment purposes. Common derivative types and how they work are also explained.
Futures and forwards
The document discusses futures and forward contracts. It defines them as agreements between two parties where one party agrees to deliver an asset at a specified future date at a predetermined price. The key differences between futures and forwards are that futures contracts are traded on exchanges, standardized, and can be traded until maturity, while forwards are private agreements that are not standardized and typically held to delivery date. Futures allow for more liquidity and offsetting of positions compared to forwards.
Derivative market
This document defines derivatives and describes different types of derivative contracts. It states that a derivative is a contract whose price is dependent on an underlying asset such as a security, commodity, or index. It provides examples of derivative contracts including forwards, futures, options, warrants, LEAPS (long-term equity anticipation securities), and swaps. The document also discusses exchange-traded versus over-the-counter derivatives and describes participants in derivative markets such as hedgers, speculators, and arbitrageurs.
Chapter 1 (overview of derivatives)
Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, bond, or equity. There are two main types of derivatives - futures contracts, which are agreements to buy or sell an asset in the future at an agreed upon price, and options contracts, which give the holder the right but not the obligation to buy or sell the underlying asset. Derivatives markets allow participants to manage risks and generate income associated with changes in prices of the underlying assets. Exchanges facilitate trading of standardized derivatives contracts and provide clearing houses to guarantee the performance of all contracts.
Futures & Forwards Contract Derivtives In A Nutshell
Futures and forwards contracts are types of derivatives that allow parties to lock in a price for an asset to be exchanged at a future date. A forward contract is a customized over-the-counter agreement between two parties, while a futures contract is standardized and traded on an exchange. Key differences are that futures contracts have daily margin settlements and lower counterparty risk. Derivatives are used by hedgers to manage risk, speculators to wager on price movements, market-makers to facilitate trading, and arbitrageurs to exploit temporary price differences across markets.
Financial derivatives
The document provides an overview of financial derivatives, including definitions and types. It discusses common derivative instruments such as forwards, futures, options, and swaps. Forwards and futures are agreements to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows. Derivatives are used for hedging risks and discovering prices. While they provide benefits like risk management, criticisms include speculation and increased systemic risk. The derivatives market has evolved over centuries with early markets in rice and currencies, and modern exchanges in commodities, stocks and foreign exchange.
Financial Derivatives, an overview
This is an attempt to introduce financial derivatives to a novice. It contains the information about derivatives and its types.
Forward & swap
1) Derivatives are financial contracts whose value is dependent on an underlying asset. Forwards and swaps are two common types of derivatives.
2) A forward contract involves an agreement between two parties to exchange an asset at a predetermined price on a future date. Swaps involve an exchange of cash flows between two parties according to a prearranged formula.
3) Common types of swaps include currency swaps, where cash flows of different currencies are exchanged, and interest rate swaps, where interest payments of fixed and floating rates are exchanged. Derivatives allow parties to hedge risks and access rates in currencies they do not have direct access to.
Ppt on derivative
The document defines derivatives and discusses different types of derivative contracts. It explains that a forward contract involves an obligation to buy or sell an asset at a future date for a specified price, while a futures contract is similar but traded on an exchange. There are two main types of options: calls, which give the holder the right to buy an asset, and puts, which give the holder the right to sell an asset. The document also identifies three types of participants in derivatives markets: hedgers use derivatives to reduce risk, speculators use them to bet on price movements, and arbitrageurs take offsetting positions to lock in risk-free profits from temporary price discrepancies.
The Good The Bad and The Ugly about Derivatives
Derivatives are financial instruments whose value is derived from underlying assets like stocks, bonds, and commodities. While derivatives can be used to transfer risk between parties, they are often traded over-the-counter without oversight of pricing or adequate consideration of counterparty risk. This can allow large speculative positions to be built using leverage, and losses incurred due to inefficient management, misunderstanding of market risk, and hard-to-value securities. Examples of risks include the bankruptcy of Long-Term Capital Management and Allied Irish Bank, as well as losses incurred from mortgage-backed securities.
Financial derivatives
This document provides an introduction to financial derivatives. It defines derivatives as financial securities whose value is derived from an underlying asset. Common underlying assets include stocks, bonds, commodities, currencies, interest rates, and market indexes. Derivatives can be traded over-the-counter or on an exchange, and include futures contracts, forwards, options, and swaps. The document discusses the origins of derivatives markets in India and the advantages and disadvantages of using derivatives. It also outlines different types of market participants in derivatives markets.
Financial derivatives
Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, currency, bond, or stock. There are several types of derivatives including forwards, futures, and options. A forward is a customized contract where the buyer agrees to purchase an asset at a set price on a future date. Futures are standardized forward contracts that are exchange-traded. Options provide the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before the expiration date.
Futures contract
Futures contracts are exchange-traded contracts that specify the quality, quantity, and delivery details of an underlying asset. They are settled daily based on changes in the spot price. Margins are deposited to minimize the risk of default. Key features of futures include daily settlement, offsetting trades to close positions before maturity, and delivery or cash settlement at expiration unless closed out earlier. Basis risk arises from uncertainty about the relationship between futures and spot prices when hedges are closed out.
Derivatives lecture3 & 4- futures
- Futures contracts call for delivery of an asset at a specified future date at an agreed price. The buyer takes a long position and commits to purchase the asset, while the seller takes a short position and commits to deliver the asset.
- Most futures contracts are settled financially rather than through physical delivery of the asset. They allow participants to hedge risk or speculate on price movements of underlying assets like commodities, financial instruments, and indexes.
- Basis risk arises from the uncertainty of the difference between the spot and futures price when closing out a hedge position. This can impact the effectiveness of hedges.
Financial derivatives ppt
A derivative is a financial instrument whose value is derived from the value of another asset, known as the underlying. There are three main types of traders in the derivatives market: hedgers who use derivatives to reduce risk, speculators who trade for profits, and arbitrageurs who take advantage of price discrepancies across markets. Derivatives can be traded over-the-counter (OTC) or on an exchange, and provide various economic benefits such as risk reduction and enhanced market liquidity.
Types of futures contract
There are two main categories of futures contracts: commodity futures and financial futures. Commodity futures include metals, energy, grains and oil seeds, livestock, and food and fiber. Financial futures include eurodollar futures, U.S. treasury futures, foreign government debt futures, swap futures, forex futures, single stock futures, and index futures. Commodity futures prices are influenced by factors like supply, demand, weather conditions and economic trends, while financial futures provide ways to manage risks related to interest rates, currencies, stocks, and indexes.
3. Trading - Types of derivatives
Descriptions and explanation of all types of derivative instruments to trade with on the capital market.
http://www.koffeefinancial.com/Static/Learn.aspx
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Forward and Futures Contract
Derivatives are financial instruments whose value is derived from an underlying asset. Forward and futures contracts are types of derivatives that allow parties to lock in a price today to purchase or sell an asset in the future. A forward contract is a customized over-the-counter agreement between two parties, while a futures contract is traded on an exchange with standardized terms. Both require mark-to-market adjustments and margin payments to mitigate risks from price fluctuations until contract settlement.
Derivative ppt
Derivatives derive their value from underlying assets such as equities, debt, currencies, and indices. Derivatives contracts include forwards, futures, options, and swaps. Forwards and futures are agreements to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows of an underlying asset. Derivatives can be used for hedging risk, speculation, or arbitrage opportunities between markets.
Derivatives
Derivatives are financial instruments whose value is based on an underlying asset such as a stock, bond, commodity, or currency. There are three main types of derivatives: futures and forwards, which are contracts to buy or sell an asset on a future date; options, which give the owner the right but not obligation to buy or sell an asset; and swaps, which involve exchanging cash flows of one party's financial instrument for those of another party. Derivatives offer benefits like speculation, hedging risk, leverage, and flexibility, but also carry risks such as credit risk, potential for crimes, and impacting the leverage of an economy's debt.
Forward and futures contracts
Futures and forward contracts lock in a price today for the purchase or sale of an asset in the future. Futures contracts are standardized and traded on exchanges, while forwards are negotiated privately. Both involve a short party committing to sell an asset and a long party committing to buy, with payment occurring at maturity. Margin requirements for futures ensure neither party defaults, as positions are marked to market daily and cash added or subtracted to offset price changes. Swaps involve exchanging cash flows, most commonly interest rate payments, with plain vanilla swaps exchanging fixed for floating rate obligations.
Derivatives
The document discusses various types of derivatives instruments used to manage financial risk, including forwards, futures, options, and swaps. It provides examples of how these derivatives are used to hedge risks related to commodities, interest rates, currencies, equities, indexes, and other underlying assets. The key types of derivatives discussed are over-the-counter contracts and exchange-traded contracts, along with examples of each like forwards, futures, and options.
Unit 1 financial derivatives
The document discusses derivatives, which are financial instruments derived from underlying assets like stocks, bonds, currencies, and commodities. Derivatives include options, futures, forwards, and swaps. They allow investors to hedge risk or speculate. Derivatives gain value based on fluctuations in the underlying asset and are used for both risk management and investment purposes. Common derivative types and how they work are also explained.
Futures and forwards
The document discusses futures and forward contracts. It defines them as agreements between two parties where one party agrees to deliver an asset at a specified future date at a predetermined price. The key differences between futures and forwards are that futures contracts are traded on exchanges, standardized, and can be traded until maturity, while forwards are private agreements that are not standardized and typically held to delivery date. Futures allow for more liquidity and offsetting of positions compared to forwards.
Derivative market
This document defines derivatives and describes different types of derivative contracts. It states that a derivative is a contract whose price is dependent on an underlying asset such as a security, commodity, or index. It provides examples of derivative contracts including forwards, futures, options, warrants, LEAPS (long-term equity anticipation securities), and swaps. The document also discusses exchange-traded versus over-the-counter derivatives and describes participants in derivative markets such as hedgers, speculators, and arbitrageurs.
Chapter 1 (overview of derivatives)
Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, bond, or equity. There are two main types of derivatives - futures contracts, which are agreements to buy or sell an asset in the future at an agreed upon price, and options contracts, which give the holder the right but not the obligation to buy or sell the underlying asset. Derivatives markets allow participants to manage risks and generate income associated with changes in prices of the underlying assets. Exchanges facilitate trading of standardized derivatives contracts and provide clearing houses to guarantee the performance of all contracts.
Futures & Forwards Contract Derivtives In A Nutshell
Futures and forwards contracts are types of derivatives that allow parties to lock in a price for an asset to be exchanged at a future date. A forward contract is a customized over-the-counter agreement between two parties, while a futures contract is standardized and traded on an exchange. Key differences are that futures contracts have daily margin settlements and lower counterparty risk. Derivatives are used by hedgers to manage risk, speculators to wager on price movements, market-makers to facilitate trading, and arbitrageurs to exploit temporary price differences across markets.
Financial derivatives
The document provides an overview of financial derivatives, including definitions and types. It discusses common derivative instruments such as forwards, futures, options, and swaps. Forwards and futures are agreements to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows. Derivatives are used for hedging risks and discovering prices. While they provide benefits like risk management, criticisms include speculation and increased systemic risk. The derivatives market has evolved over centuries with early markets in rice and currencies, and modern exchanges in commodities, stocks and foreign exchange.
Financial Derivatives, an overview
This is an attempt to introduce financial derivatives to a novice. It contains the information about derivatives and its types.
Forward & swap
1) Derivatives are financial contracts whose value is dependent on an underlying asset. Forwards and swaps are two common types of derivatives.
2) A forward contract involves an agreement between two parties to exchange an asset at a predetermined price on a future date. Swaps involve an exchange of cash flows between two parties according to a prearranged formula.
3) Common types of swaps include currency swaps, where cash flows of different currencies are exchanged, and interest rate swaps, where interest payments of fixed and floating rates are exchanged. Derivatives allow parties to hedge risks and access rates in currencies they do not have direct access to.
Ppt on derivative
The document defines derivatives and discusses different types of derivative contracts. It explains that a forward contract involves an obligation to buy or sell an asset at a future date for a specified price, while a futures contract is similar but traded on an exchange. There are two main types of options: calls, which give the holder the right to buy an asset, and puts, which give the holder the right to sell an asset. The document also identifies three types of participants in derivatives markets: hedgers use derivatives to reduce risk, speculators use them to bet on price movements, and arbitrageurs take offsetting positions to lock in risk-free profits from temporary price discrepancies.
The Good The Bad and The Ugly about Derivatives
Derivatives are financial instruments whose value is derived from underlying assets like stocks, bonds, and commodities. While derivatives can be used to transfer risk between parties, they are often traded over-the-counter without oversight of pricing or adequate consideration of counterparty risk. This can allow large speculative positions to be built using leverage, and losses incurred due to inefficient management, misunderstanding of market risk, and hard-to-value securities. Examples of risks include the bankruptcy of Long-Term Capital Management and Allied Irish Bank, as well as losses incurred from mortgage-backed securities.
Financial derivatives
This document provides an introduction to financial derivatives. It defines derivatives as financial securities whose value is derived from an underlying asset. Common underlying assets include stocks, bonds, commodities, currencies, interest rates, and market indexes. Derivatives can be traded over-the-counter or on an exchange, and include futures contracts, forwards, options, and swaps. The document discusses the origins of derivatives markets in India and the advantages and disadvantages of using derivatives. It also outlines different types of market participants in derivatives markets.
Financial derivatives
Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, currency, bond, or stock. There are several types of derivatives including forwards, futures, and options. A forward is a customized contract where the buyer agrees to purchase an asset at a set price on a future date. Futures are standardized forward contracts that are exchange-traded. Options provide the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before the expiration date.
Futures contract
Futures contracts are exchange-traded contracts that specify the quality, quantity, and delivery details of an underlying asset. They are settled daily based on changes in the spot price. Margins are deposited to minimize the risk of default. Key features of futures include daily settlement, offsetting trades to close positions before maturity, and delivery or cash settlement at expiration unless closed out earlier. Basis risk arises from uncertainty about the relationship between futures and spot prices when hedges are closed out.
Derivatives lecture3 & 4- futures
- Futures contracts call for delivery of an asset at a specified future date at an agreed price. The buyer takes a long position and commits to purchase the asset, while the seller takes a short position and commits to deliver the asset.
- Most futures contracts are settled financially rather than through physical delivery of the asset. They allow participants to hedge risk or speculate on price movements of underlying assets like commodities, financial instruments, and indexes.
- Basis risk arises from the uncertainty of the difference between the spot and futures price when closing out a hedge position. This can impact the effectiveness of hedges.
Financial derivatives ppt
A derivative is a financial instrument whose value is derived from the value of another asset, known as the underlying. There are three main types of traders in the derivatives market: hedgers who use derivatives to reduce risk, speculators who trade for profits, and arbitrageurs who take advantage of price discrepancies across markets. Derivatives can be traded over-the-counter (OTC) or on an exchange, and provide various economic benefits such as risk reduction and enhanced market liquidity.
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Futures & Forwards Contract Derivtives In A Nutshell
Futures & Forwards Contract Derivtives In A Nutshell
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Types of futures contract
There are two main categories of futures contracts: commodity futures and financial futures. Commodity futures include metals, energy, grains and oil seeds, livestock, and food and fiber. Financial futures include eurodollar futures, U.S. treasury futures, foreign government debt futures, swap futures, forex futures, single stock futures, and index futures. Commodity futures prices are influenced by factors like supply, demand, weather conditions and economic trends, while financial futures provide ways to manage risks related to interest rates, currencies, stocks, and indexes.
3. Trading - Types of derivatives
Descriptions and explanation of all types of derivative instruments to trade with on the capital market.
http://www.koffeefinancial.com/Static/Learn.aspx
Futures and future contracts & trading mechanism of derivatives on stock...
The document provides an overview of futures contracts and futures trading on stock exchanges. It defines key terms like futures contracts, forwards contracts, and differences between the two. It describes the trading mechanism for derivatives, including standardized contracts, delivery dates, and margins. It also outlines order types, market participants, trading processes, and types of instruments traded on futures and options markets.
Futures And Forwards
Futures and forwards are contracts that require deferred delivery of an underlying asset or cash settlement at a future date. A future is a standardized contract traded on an exchange, while a forward is a customized over-the-counter contract. Forwards are useful when futures do not exist for certain commodities/financials or when standard futures terms do not match needs. Forwards involve counterparty risk while futures involve clearinghouse guarantees.
Understanding stock-index-futures
Stock index futures were introduced in 1982 and have since become the second most significant sector of futures trading, after interest rates. The document discusses the mechanics and pricing of stock index futures contracts, focusing on E-mini contracts. E-mini contracts have more modest contract sizes than traditional stock index futures contracts and are traded exclusively via electronic platforms. The document explains how stock index futures are priced relative to their underlying spot indexes, the concept of cost of carry pricing, and how arbitrage helps enforce cost of carry pricing in stock index futures markets.
Derivatives. cmi
This document discusses derivative instruments such as futures and forwards. It defines derivatives as instruments whose value is derived from an underlying security such as a stock, commodity, currency, or index. Future contracts obligate the buyer and seller to transact at a predetermined price on a future date, while forward contracts are similar but not standardized. Reasons for using derivatives include hedging against volatility and speculation. Key concepts discussed include short selling, holding long positions, and offsetting forward contracts before expiration to realize gains or losses.
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Forward and Futures
This document discusses forwards and futures contracts. It defines forwards as agreements between two parties to buy or sell an asset at a specific price and date without standardized terms or regulation. Futures, on the other hand, are standardized contracts traded on exchanges, with clearinghouses that act as intermediaries and mark positions to market daily. The document provides examples of different derivative types and exchanges, and discusses key differences between forwards and futures regarding standardization, liquidity, counterparty risk, and other factors. It also outlines the roles that hedgers, speculators, and arbitrageurs play in the futures markets.
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2. Existing programs focus too much on a few courses rather than coherence across the program.
3. The new program will draw from various fields like mathematics, physics, human factors, and social sciences to teach skills for designing and managing service delivery and performance improvement. It will provide a balanced education with both immediate applicability and a foundation for continued learning.
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The document discusses transportation management and supply chain logistics. It covers 4 key areas: 1) economic drivers of transport costs like distance, volume, and product characteristics, 2) cost structures like variable, fixed, joint and common costs, 3) carrier pricing strategies like cost-based, value-based, and combination pricing, and 4) rates and ratings like class and commodity rates as well as special rates. It also discusses the roles and functions of a traffic management department.
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This document outlines the various institutional support systems that provide assistance to small and medium enterprises in India at different levels of government and non-government organizations. It discusses the key support institutions at the central government level like the Small Scale Industries Board, National Bank for Agriculture and Rural Development, Small Industries Development Organization, and National Small Industries Corporation. Similar state-level organizations are also described along with important non-government bodies like the Indian Council of Small Industries and Laghu Udyog Bharti. The conclusion emphasizes that India has established a strong foundation of institutions to promote and assist entrepreneurs in initiating industrial growth across the country.
Market intermediaries in Agricultural Marketing
Market intermediaries, also known as middlemen, play an important role in facilitating the marketing of goods between manufacturers, wholesalers, retailers, and consumers. There are several types of intermediaries, including merchant middlemen who take ownership of goods, agent middlemen who represent buyers and sellers without owning the goods, speculative middlemen who buy and sell goods to profit from price fluctuations, processors who add value to raw materials, and facilitative middlemen like laborers, transporters, and advertisers who assist the marketing process without directly buying or selling goods. Overall, intermediaries perform crucial functions in assembling, transporting, storing, processing, financing, and exchanging goods as they move from producers to ultimate consumers.
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Institutionalsupporttosmallandmediumenterprises 120627021515-phpapp01
Institutional support is provided to small and medium enterprises at the central, state, and non-government levels. At the central level, key support institutes include the Small Industries Development Board, National Bank for Agriculture and Rural Development, Small Industries Development Organisation, National Small Industries Corporation, and Small Industries Development Bank of India. At the state level, important support bodies are State Financial Corporations, State Small Industries Development Corporations, and Small Industries Services Institutes. These various institutes provide financial assistance, training, technology and infrastructure support, marketing assistance, and other services to promote the growth of small businesses.
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Futures and future contracts & trading mechanism of derivatives on stock...
Futures and future contracts & trading mechanism of derivatives on stock...
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Introduction to derivatives
The document provides an overview of derivatives presented by group "The Trio" comprising of Neelam, Fatima, and Benish. It discusses the history and development of derivatives markets dating back to medieval times. It describes the key players in derivatives markets as hedgers, speculators, and arbitrageurs. Hedgers use derivatives to reduce risk, while speculators aim to profit from price movements. Arbitrageurs exploit temporary price differences across markets. The document also covers various types of derivatives including forwards, futures, and options contracts. It provides details on how these contracts work, their risk-return characteristics, and the current status of derivatives markets in Pakistan.
DERIVATIVES UNIT 2.docx
- A forward market allows for the future delivery of stocks, currencies, or commodities at a predetermined price, protecting buyers and sellers from price fluctuations. Forward contracts are privately negotiated over-the-counter, while futures contracts are standardized and traded on an exchange.
- The main purposes of forward and futures markets are to hedge against risks from fluctuating prices and interest rates and to allow investors to speculate. These markets provide flexibility and reduce risks for financial companies and investors.
Derivatives markets ppt @ bec doms bagalkot mba
The document provides an overview of derivatives markets, focusing on futures, options, and swaps.
[1] Futures contracts allow parties to agree on delivery of an asset at a future date for a currently agreed upon price. They are traded on exchanges and involve standardized terms. Options contracts grant the buyer rights, but not obligations, related to an underlying asset. [2] Swaps involve an exchange of cash flows between two parties, such as one party paying fixed interest rates and receiving floating rates. They are customized agreements between counterparties. [3] These derivative contracts allow participants to hedge risks and speculate on price movements of underlying assets.
Derivatives
The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices
Options and Futures Presentationv2.pptx
Derivatives are financial contracts whose value is based on an underlying asset. Common derivatives include futures contracts and options. An options contract gives the buyer the right to purchase an asset at a set price, while a futures contract requires the buyer and seller to exchange an asset at a predetermined price on a future date. Both futures and options allow corporations and investors to hedge against unfavorable price movements in the underlying asset. Futures contracts in particular help lock in prices for transactions that corporations will need to make in the future.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
1. A futures contract is an agreement between two parties to buy or sell an asset at a predetermined price on a specified future date.
2. There are two main types of participants in futures markets: hedgers, who aim to reduce risk, and speculators, who seek to profit from price changes.
3. Common types of futures contracts include individual stock futures, stock index futures, commodity futures, and interest rate futures.
Derivatives market
The document provides an overview of derivatives markets, including the key terms and participants. It discusses how derivatives help transfer and hedge risks, facilitate price discovery, and catalyze economic activity. The main types of derivatives are forwards, futures, swaps, and options. Forwards and swaps are over-the-counter derivatives privately negotiated between parties, while futures and options are exchange-traded standardized contracts. Hedgers use derivatives to offset price risks, while speculators and arbitrageurs take positions to profit from price movements.
Derivatives
This document provides an overview of derivatives and the capital markets in India. It defines key terms like the primary and secondary markets, stock exchanges, indices, and types of derivatives like forwards, futures, options, and swaps. It describes the functions and objectives of derivatives for hedging risk and speculation. The history of derivatives trading in India is summarized, along with the major participants like hedgers, speculators, and arbitrageurs.
Devrivatives in india
The document discusses the historical development, concepts, types, and regulation of derivatives markets in India. It provides an overview of key derivatives instruments like futures contracts, options, and swaps. The regulatory framework in India is outlined, covering regulations by SEBI and RBI. The future of derivatives markets in India is poised for growth, though trading risks like market, credit, liquidity, and operational risks must be managed.
Futures and forwards
The document discusses futures and forward contracts. It defines them as derivatives whose prices are derived from underlying assets like commodities, currencies, or stocks. Forward contracts involve a private agreement between two parties to buy or sell an asset at a future date at a predetermined price, creating long or short positions. Future contracts are standardized, legally binding forward contracts that are traded on exchanges, allowing for liquidity and partial settlements before maturity. The document provides examples of long and short positions in forward contracts and differences between forward and futures contracts.
Chapter 1
1. A derivative is a financial instrument whose value is based on an underlying asset such as stocks, currencies, commodities, bonds, or market indexes. Examples are futures, forwards, options and swaps.
2. Derivatives play a key role in transferring risk between parties in the economy. They are traded both on exchanges as well as over-the-counter between banks and other institutions.
3. Derivatives are used to hedge risks, speculate, engage in arbitrage, or change the nature of investments without selling and rebuying assets.
investment analysis and derivatives
Derivatives are financial instruments whose value is derived from an underlying asset. There are several types of derivatives:
1) Forward contracts are customized agreements between two parties to buy or sell an asset at a future date for a fixed price, exposing the parties to counterparty risk.
2) Futures contracts are similar to forwards but are exchange-traded, with standardized terms, eliminating counterparty risk.
3) Options contracts give the holder the right, but not the obligation, to buy or sell the underlying asset at a specified price on or before the expiration date.
4) Warrants and convertibles give holders the right to buy or convert into the underlying asset within a given time period.
Investment analysis and derivatives
Derivatives are financial instruments whose value is derived from an underlying asset. There are several types of derivatives:
1) Forward contracts are customized agreements between two parties to buy or sell an asset at a future date for a fixed price, exposing the parties to counterparty risk.
2) Futures contracts are similar to forwards but are exchange-traded, with standardized terms, eliminating counterparty risk.
3) Options contracts give the holder the right, but not the obligation, to buy or sell the underlying asset at a specified price on or before the expiration date.
4) Warrants and convertibles give holders the right to buy or convert into the underlying asset within a given time period.
Futures
This document discusses futures contracts. It defines a futures contract as a legal agreement to buy or sell an asset at a predetermined price at a specified time in the future. Futures contracts allow parties to manage the risks of price fluctuations. There are two main objectives for futures contracts - hedging to manage risk, and speculation to potentially profit from price changes. The document outlines various types of futures contracts including those for commodities, interest rates, stock indexes, and currencies.
Financial Derivatives.pptx
Derivatives are financial instruments whose value is derived from an underlying asset. The three main types of derivatives are forwards, futures, and options. Forwards are customized contracts traded over-the-counter, while futures are standardized contracts traded on an exchange. Options give the holder the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows of one party's financial instrument for those of another party. Derivatives allow parties to manage financial risks and speculate in the market.
Derivatives - Classroom Presentation
The document summarizes the history and types of derivatives in India. It discusses:
- Futures trading began in India in 1875 through the Bombay Cotton trade association. The government later banned some derivatives until 1995-1999 when regulations were amended.
- Derivatives include futures, forwards, swaps, and options, whose values are derived from underlying assets. Common underlying assets include commodities, currencies, interest rates and stocks.
- The main purpose of derivatives is to transfer risk from one party to another through hedging. This allows farmers, for example, to guarantee prices and encourage investment.
Financial Derivative
Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, currency, or stock. A derivative is a contract between two parties that specifies conditions to buy or sell the underlying asset at a future date. There are several types of derivatives including forwards, futures, options, and swaps. Forwards are customized contracts negotiated between two parties, while futures are standardized contracts traded on an exchange. Derivatives are used by hedgers to reduce risk, speculators to seek profits, and arbitrageurs to exploit pricing discrepancies across markets.
basic05 important notes for MBA and BBA
Derivative securities are financial instruments whose value is linked to an underlying asset. The document discusses various types of derivative contracts including forwards, futures, options, and swaps. Forwards involve an agreement to exchange an asset at a predetermined price on a future date. Futures contracts are standardized forwards that are exchange-traded. Options provide the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows of one party's financial instrument for those of another party. These derivatives allow firms to hedge risks like currency and interest rate fluctuations.
Derivatives
Derivatives derive their value from underlying assets. There are various types including forwards, futures, options, and swaps. Forward contracts are bilateral agreements to buy or sell an asset in the future at predetermined terms. Futures are standardized forward contracts that are traded on an exchange. Options provide the right but not obligation to buy or sell an asset by a specified date. Swaps involve exchanging cash flows of underlying assets like interest rates or currencies. Derivatives allow participants to hedge or speculate on price movements of the underlying assets.
A summer training project report presentation on
This document summarizes a presentation on derivatives, specifically futures and options, given at JM Financial Services Ltd. It provides an overview of JM Financial as a large Indian broking firm, introduces various derivative products like forwards, futures, and options. It describes how futures and options are traded on exchanges, including details on contracts, expiration cycles, and pricing. It also outlines the three main types of derivative traders - hedgers who minimize risk, speculators who bet on market movements, and arbitrageurs who profit from pricing discrepancies. The conclusion emphasizes how derivatives allow participants to convert unlimited risks to limited ones and serve as risk management tools.
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PB601 Investment Management
- 1. Futures Contract & Forward Contract
- 2. Definition of futures Contract A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.
- 3. A forward contract is an agreement between two parties to buy or sell an asset (which can be of any kind) at a pre- agreed future point in time. Definition of forward Contract
- 4. Hedging : Techniques that attempts to reduce risk. Speculators : Use futures & forward contract to acquire risk. Market Makers: company or an individual, that quotes both a buy & sell price in a financial instrument, hoping to make a profit on the bid-offer spread. Function of futures & forward contract
- 5. Commodity Futures : Crude Palm Oil Futures (FCPO) USD Crude Palm Oil Futures (FUPO) Crude Palm Kernel Oil Futures (FPKO) Options on Crude Palm Oil Futures (OCPO) Equity Futures : FTSE Bursa Malaysia KLCI Futures (FKLI) Single Stock Futures (SSFs) Types of futures contract
- 6. Financial Futures 3 Month Kuala Lumpur Interbank Offered Rate Futures (FKB3) 3-Year Malaysian Government Securities Futures (FMG3) Year Malaysian Government Securities Futures (FMG5) Types of futures contract
- 7. Currencies Futures United States Dollar (USD) Japanese Yen (JPY) Etc. Metals Futures Gold Silver Copper Etc. Types of futures contract
- 8. Differences between futures & forward contract Futures Contract Forward Contract No default risk. Rare default risk Exist. Daily settlement of profit and loss, which is known as mark to market. The profit or loss is accumulated till the expiry of contract. Publically traded. Privately traded. Product issued by Bursa Malaysia. Product issued by individual & firms. Quoted and traded on the Bursa Negotiated directly by the buyer