Exchange traded derivatives for dummies
Banks have complex computer exchange traded derivatives for dummies to tell them how much they could lose if the market moves by a certain amount. Swaps can be considered a relatively straightforward way of gaining exposure to a required asset class. The International French futures and options exchange.
Single-stock futures may be cash-settled or physically settled by the transfer of the underlying stocks at expiration, although in the United Exchange traded derivatives for dummies only physical settlement is used to avoid speculation in the market. From Wikipedia, the free encyclopedia. In the s, financial futures began to dominate trading. This page was last edited on 9 Julyat
In finance exchange traded derivatives for dummies, a warrant is a security that entitles the holder to buy stock of the company that issued it at a specified price, which is much lower than the stock price at time of issue. From Wikipedia, the free encyclopedia. Options were invented because people liked the security of knowing they could buy or sell at a certain price, but wanted the chance to profit if the market price suited them better at the time of delivery. It is a hybrid security with debt- and equity-like features.
There are derivatives on almost all types of asset which are traded - the main four being bonds which vary in price exchange traded derivatives for dummies to interest ratescurrencies, shares and what can broadly be described as goods metals, energy sources, agricultural produce etc. Equity basket derivatives are futures, options or swaps where the underlying is a non-index basket of shares. They could gamble, for example, on the frozen concentrated orange juice crop without having to buy an orange grove.
All Wikipedia articles needing clarification Wikipedia articles needing clarification from March All accuracy disputes Articles with disputed statements from November It is a hybrid security with debt- and equity-like features. For example a firm may want to swap a floating interest rate for fixed interest rate to minimise uncertainty. An equity index swap is an agreement between two parties to swap two sets of cash flows on predetermined dates for an agreed number of years. These equity derivatives derive their value from the price of the underlying stock or stocks.
Single-stock futures are exchange-traded futures contracts based on an individual underlying security rather than a stock index. All Wikipedia articles exchange traded derivatives for dummies clarification Wikipedia articles needing clarification from March All accuracy disputes Articles with disputed statements from November This enables banks, traders or investors such as George Soros to bet on price movements without having to deal with the actual assets. Equity options are the most common type of equity derivative.
The image of derivatives as highly risky investments stems from the fact that contracts which may be worth millions if the market moves in a certain way cost only a fraction of that value. Their performance is similar to that of the underlying equity itself, although as futures contracts they are usually traded with greater leverage. Exchange traded derivatives for dummies Board of Trade. Convertible bonds are bonds that can be converted into shares of stock in the issuing companyusually at some pre-announced ratio. This involves buying and selling futures or options on shares, bonds or currencies.
Mention derivatives and most people think of Nick Leeson, highly risky financial investments and City 'wide boys' making lots of money. Equity basket derivatives are futures, options or swaps where the underlying is a non-index basket of shares. It is a hybrid security with debt- exchange traded derivatives for dummies equity-like features.