Derivatives

Module 1
Types of derivatives:

 Forward
 Option
 Swap: contract between two parties exchange the cash flows from two different financial
instruments. Only for financial firms and corporates.
 Origin:

Participants in derivatives:

Hedge

 Long hedge involves holding a long position in the future market. When a person is
agreed to buy in the future is called long hedge.
 Short hedge involves holding a short position in the future market. It is given to only
those who have already owned an underlying asset. When a person is agreed to
sell in the future is called short hedge.

Speculations:

One who bets on the derivatives market based on his views on the potential
movement of the underlying stock price.

Arbitrageurs:

Trying for a riskless profit trade. Buy at a place where it is available in cheaper and
sell at a place where it is giver at higher price.