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  • Financial Derivatives: Amity Business School

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    Sankalp Malhotra
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    A derivative is any security whose price is determined by the value of another asset. Credit default SWAPS are a contract to exchange streams of cash flows based on certain events. FORWARDS Amity Business School a contract to buy or sell an asset at a future date not standardized or regulated Settlement takes place on delivery date.

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    A derivative is any security whose price is determined by the value of another asset. Credit default SWAPS are a contract to exchange streams of cash flows based on certain events. FORWARDS Amity Business School a contract to buy or sell an asset at a future date not standardized or regulated Settlement takes place on delivery date.

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    3 views10 pages

    Financial Derivatives: Amity Business School

    Uploaded by

    Sankalp Malhotra
    A derivative is any security whose price is determined by the value of another asset. Credit default SWAPS are a contract to exchange streams of cash flows based on certain events. FORWARDS Amity Business School a contract to buy or sell an asset at a future date not standardized or regulated Settlement takes place on delivery date.

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    Amity Business School

    FINANCIAL DERIVATIVES

    What is a derivative?

    Amity Business School

    A derivative is any security whose price is determined by the value of another asset. This asset is called the underlying security
    Underlying Price Change Derivative Price Change

    PURPOSE OF DERIVATIVES
    HEDGING SPECULATION

    Amity Business School

    Amity Business School

    TYPES OF DERIVATIVES

    SWAPS

    Amity Business School

    A contract to exchange streams of cash flows based on certain events. Interest Rate, Currencies, Commodities Prices Credit Default Swaps

    Credit Default Swap

    Amity Business School

    Insurance protection against default. The seller of CDS is the insurer (taking the risk) and seller is the policy holder (reducing the risk). In return the buyer pays some cash upfront (similar to insurance premium). Credit Value: The Underlying CDS: The Derivative

    FORWARDS

    Amity Business School

    A contract to buy or sell an asset at a future date Not standardized or regulated Settlement takes place on delivery date.

    FUTURES

    Amity Business School

    Similar to Forwards Standardized, regulated and traded on exchanges. Contracts usually close down before maturity.

    OPTIONS

    Amity Business School

    A contract giving right but not obligation to buy or sell the security. CALL: Right to buy PUT: Right to sell Movie Ticket

    Amity Business School

    THANK YOU

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