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  • REVIEW OF PRINCIPLES - Derivatives

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    Derivative instruments are important financial tools used to manage risk. There are four main types of derivatives: forwards, futures, options, and swaps. Forwards and futures involve an obligation to buy or sell an asset at a future date, while options provide the right but not obligation to do so. Swaps involve exchanging cash flows of one party's financial instrument for those of another party. Derivative transactions can be in, at, or out of the money depending on the current market price of the underlying asset. A call option gives the right to buy an asset while a put option gives the right to sell. A long position profits when the derivative increases in value, while a short position profits when it decreases in value

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    Derivative instruments are important financial tools used to manage risk. There are four main types of derivatives: forwards, futures, options, and swaps. Forwards and futures involve an obligation to buy or sell an asset at a future date, while options provide the right but not obligation to do so. Swaps involve exchanging cash flows of one party's financial instrument for those of another party. Derivative transactions can be in, at, or out of the money depending on the current market price of the underlying asset. A call option gives the right to buy an asset while a put option gives the right to sell. A long position profits when the derivative increases in value, while a short position profits when it decreases in value

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    © All Rights Reserved
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    11 views2 pages

    REVIEW OF PRINCIPLES - Derivatives

    Uploaded by

    didi chen
    Derivative instruments are important financial tools used to manage risk. There are four main types of derivatives: forwards, futures, options, and swaps. Forwards and futures involve an obligation to buy or sell an asset at a future date, while options provide the right but not obligation to do so. Swaps involve exchanging cash flows of one party's financial instrument for those of another party. Derivative transactions can be in, at, or out of the money depending on the current market price of the underlying asset. A call option gives the right to buy an asset while a put option gives the right to sell. A long position profits when the derivative increases in value, while a short position profits when it decreases in value

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    © All Rights Reserved
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    of 2

    Review of principles- derivatives

    Section:_______ Course: FM 567 Name :______________________________________


    Explain briefly the following questions:

    Discuss the importance and use of derivative instruments?(5r)

    1
     
     
     
    2
    What are distinctive features of each type? (20r)

    1. Forward:

    2. Futures:

    3. Options:

    4. Swaps :
     

    Distinguish the moneyness of the transactions. (15r)

    1. In the Money

    2. At the Money

    3 3. Out of the Money


     
     
     

    Differentiate:
    I. Call options with Put Options (10r)

    II. Long Options and Short Options (10r)

    Criteria for Scoring: (10 points for each) Grade: base 40 + 60/60 = 100% Activity
    Substance Coherence
    Clarity Sentence Construction
    Accuracy

    /adaltarejos
    /adaltarejos

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