Derivatives Products
Kinds of Derivatives products
Forwards - Customized O.T.C. contracts
Futures - Standardized exchange traded
Options - Calls
and puts with right out no obligations.
Warrants - 9
months and over maturity & O.T.C. contracts
Leaps - Long term equity anticipation
securities with maturity over
Three
years.
Baskets - Index options
Swaps - Private agreements
for swapping the interest related to cash
Flow
called interest rate swaps or swapping the different
Currencies
with principal and interest.
Swaptions - Swaptions are
options to buy or sell swaps that become
Operative at the expiry of option
Functions of Derivative
Markets
Derivative market is controlled, organized, market therefore it
caters following functions:
1) Derivative help in
discovery of future as well as current price.
2) It helps in
transferring the risk.
3) It
gives higher trading volume acting as a catalyst in the capital/entrepreneurial
activity.
4) It
increases savings and investment in long run.
Participants in
Derivative Markets
A) Hedgers : Face the risks associated with
the price of assets by reducing or
Eliminating it by futures or options.
B) Speculators :
Bet or speculate on future movement in the price of assets
By forming
bullish or bearish opinion.
C) Arbitrageurs:
Take advantages of discrepancy between prices in two
different
markets
