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Financial Derivatives

Financial Derivatives

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Published by: api-3727090 on Oct 15, 2008
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03/18/2014

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Financial Derivatives

A \u2018derivative\u2019 is a financial product the
value of which is derived from the value of
the underlying asset.

Derivatives are widely used in developed financial markets to speculate on currencies and financial assets.

Also used to hedge portfolio risk and hedging exposures by corporate finance managers.

Types of derivatives

a)Future contract
b)Option contracts
c)Swaps
d)Engineered products based on the

combination of futures, options, equity and
bonds
Swaps:

swap is an agreement between two or more
parties to exchange sets of cash flows over
a period in future.

Basic kinds of swaps:
3.Currency swaps
4.Interest rate swaps

An interest rate swap is an arrangement
whereby one party exchanges one set of
interest rate payment for another.

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