Chapter13.14 - Financial Derivatives and Conflicts of...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Financial Derivatives and Conflicts of Interest Chapters 13 and 14
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Overview Financial Derivatives Forward Contracts Financial Futures Options Swaps Conflicts of Interest Sarbanes-Oxley
Background image of page 2
Why Derivatives? Volatile interest rates, stock prices of 70s and 80s Managers want to reduce risk! Contracts related to previously issued securities, so it is like a safety net Arbitrage Chance to make money/off balance sheet profits
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
How Derivatives? Hedge Enter into a financial contract that reduces risk Taking a long position: buy an asset Taking a short position: sell an asset Hedging using derivitives: take one position while simultaneously taking the other position at a future date E.g. buy a bond now (long position) and make a contract to sell it (short position) a year from now at the expected market rate
Background image of page 4
Forward Contracts A contract between two parties to engage in financial transaction in the future Advantage Allows hedging
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/07/2008 for the course ECON 4130 taught by Professor Springer during the Spring '08 term at Rensselaer Polytechnic Institute.

Page1 / 15

Chapter13.14 - Financial Derivatives and Conflicts of...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online