Financial Derivatives.pptx - Financial Derivatives A derivative= A financial instrument Forward futures options and swaps markets • There are two

Financial Derivatives.pptx - Financial Derivatives A...

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Financial Derivatives A derivative= A financial instrument Forward, futures, options and swaps markets
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There are two groups of derivative contracts, the privately traded Over-the-counter (OTC) derivatives that do not go through an exchange or other intermediary and exchange-traded derivatives (ETD) that are traded through specialized derivatives exchanges or other exchanges.
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A derivative can be define as a financial instrument whose value depends on (or derives from) the values of other, more basic, underlying variables. Very often the variables underlying derivatives are the prices of traded assets. However, derivatives can be dependent on almost any variable .
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Definition of Financial Derivatives A financial derivative is a contract between two (or more) parties where payment is based on (i.e., "derived" from) some agreed- upon benchmark. Since a financial derivative can be created by means of a mutual agreement, the types of derivative products are limited only by imagination and so there is no definitive list of derivative products.
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Repayment of Financial Derivatives In creating a financial derivative, the means for, basis of, and rate of payment are specified. Payment may be in currency, securities, a physical entity such as gold or silver, an agricultural product such as wheat, a transitory commodity such as communication bandwidth or energy.
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