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DERIVATIVES HISTORY

Discuss DERIVATIVES HISTORY within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; DERIVATIVES A derivative instrument, broadly, is a financial contract whose payoff structure is determined by the value of an underlying ...

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DERIVATIVES HISTORY
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Sunanda K. Chavan
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DERIVATIVES HISTORY - October 8th, 2010

DERIVATIVES

A derivative instrument, broadly, is a financial contract whose payoff structure is determined by the value of an underlying commodity, security, interest rate, share price index, exchange rate, oil price or the like.

Thus a derivative instrument derives its value from some underlying variable.

A derivative instrument by itself does not constitute ownership. It is instead, a promise to convey ownership.
All derivatives are based on some ‘cash’ products.

The underlying asset of a derivative instrument may be any product of the following type
:
• Commodities including grains, coffee beans, etc.

• Precious metals like gold and silver.

• Foreign exchange rate.

• Bonds of different types, including medium to long-term negotiable debt securities issued by governments, companies, etc.

• Short-term debt securities such as T-bills.

• Over-The-Counter (OTC) money market products such as loans or deposits.

However, the most important use of derivatives is in transferring market risk, called Hedging, which is a protection against losses resulting from unforeseen price or volatility changes. Thus, derivatives are a very important tool of risk management.

There are many kinds of derivatives including futures, options, interest rate swaps, and mortgage derivatives.
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Rose Marry
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Re: DERIVATIVES HISTORY - April 18th, 2016

Quote:
Originally Posted by sunandaC View Post
DERIVATIVES

A derivative instrument, broadly, is a financial contract whose payoff structure is determined by the value of an underlying commodity, security, interest rate, share price index, exchange rate, oil price or the like.

Thus a derivative instrument derives its value from some underlying variable.

A derivative instrument by itself does not constitute ownership. It is instead, a promise to convey ownership.
All derivatives are based on some ‘cash’ products.

The underlying asset of a derivative instrument may be any product of the following type
:
• Commodities including grains, coffee beans, etc.

• Precious metals like gold and silver.

• Foreign exchange rate.

• Bonds of different types, including medium to long-term negotiable debt securities issued by governments, companies, etc.

• Short-term debt securities such as T-bills.

• Over-The-Counter (OTC) money market products such as loans or deposits.

However, the most important use of derivatives is in transferring market risk, called Hedging, which is a protection against losses resulting from unforeseen price or volatility changes. Thus, derivatives are a very important tool of risk management.

There are many kinds of derivatives including futures, options, interest rate swaps, and mortgage derivatives.
Hey there,

I am also uploading a document which will give more detailed Overview on Derivatives markets, products and participants.
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