FIN4360_Chapter20_Slides

FIN4360_Chapter20_Slides - Investment Analysis and...

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Investment Analysis and Portfolio Management C h a p t e r 2 0 An Introduction to Derivative Markets and Securities Overview of Derivative Markets Investing with Derivative Securities The Relationship between Forward and Option Contracts Introduction to the Use of Derivatives
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20-2 An Overview of Derivatives Value is depends directly on, or is derived from, the value of another security or commodity, called the underlying asset Forward contracts are agreements between two parties - the buyer agrees to purchase an asset, the seller agrees to sell the asset, at a specific date at a price agreed upon now Futures contracts are similar, but are standardized and traded on an organized exchange
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20-3 An Overview of Derivatives Options offer the buyer the right, but not the obligation, to buy or sell and underlying asset at a fixed price up to or on a specific date Buyer is long in the contract Seller or “writer” is short the contract
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FIN4360_Chapter20_Slides - Investment Analysis and...

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