Derivatives

RECENT NEWS
The Economic Times  5 hrs ago  Comment 
Though the Nifty has recovered 2% for the week, barring Thursday, the index's gains were accompanied by a decline in open interest and volume of the November future, signifying a not so confident stance of the traders.
Mondo Visione  Nov 8  Comment 
NASDAQ Dubai's equity derivatives market has won the Futures & Options World (FOW) 2009 Award for "Best Innovation by an Exchange in Product Design, Middle East."
CANOE.ca  Nov 7  Comment 
OMAHA, Neb. - Paper gains on derivative contracts helped Berkshire Hathaway Inc. triple its third-quarter profit as its insurance businesses did well, but Warren Buffett's company said Friday that many of its other operating businesses struggled.
Canadian Business  Nov 6  Comment 
OMAHA, Neb. - Paper gains on derivative contracts helped Berkshire Hathaway Inc. triple its third-quarter profit as its insurance businesses did
Clusterstock  Nov 6  Comment 
William D. Cohan profiles Larry Summers in the December issue of Vanity Fair and confirms what we've long known: the star economic counselor has been his own worst enemy. The whole thing is worth a read, but here are some highlights: Iris...
Jr Deputy Accountant  Nov 4  Comment 
If you look at this from the perspective of JP Morgan, a few million is nothing. Imagine they do this in 50 different counties around the country and only get caught once or twice, that's a paltry $50 million plus some fees they would have never...
Shocked Investor  Nov 4  Comment 
Bloomberg reports that the Congressional Budget Office calculates that the new laws for the derivatives industry would cost the U.S. government $872M to implement, as regulators increase oversight and policing of the market. That is $581M for...
Bloomberg  Nov 4  Comment 
New laws for the derivatives industry would cost the U.S. government $872 million to implement as regulators increase oversight as part of expanded powers to police the market, the Congressional Budget Office said.
Wall Street Journal  Nov 4  Comment 
Barney Frank said he may tighten his over-the-counter derivatives bill to prevent companies from finding clever ways to skirt the clearing and trading rules.
Mondo Visione  Nov 4  Comment 
At its meeting on October 30th in Oporto, EACH, the European Association of Central Counterparty Clearing Houses, welcomed the European Commission's Communication "Ensuring efficient, safe and sound derivatives markets: Future policy actions".
Suggest a News Source
Topic
Top news source/blog that we're missing
Why do you recommend this news source?
Close 
Thanks for your suggestion!
 
RELATED WIKI ARTICLES

Related Articles

 

Derivatives are investment vehicles whose price is dependent on an underlying asset. The most common form of derivatives include stock options, futures & swaps. Options are contracts that give the holder the right but not the obligation to buy or sell a specific security at a pre-determined price on a pre-determined date. The two kinds of options are call and put options. A call holder has the right but not the obligation to “call” stock away from the call writer. So as the price of the underlying security, in this case a stock moves up (or down) the call option becomes worth more (or less). Since derivatives are essentially a contract with an associated value there are many forms of derivatives. Some companies use derivatives to hedge against natural resource price swings or fluctuations in weather that may affect yields.

Example: A lease option to buy a house. The lease contract has terms that give you the right to buy the house at a specific price any time you want (until the lease contract expires). Suppose the terms stated that you could buy the house anytime within the first year of leasing from the owner for 100,000. If the price of the house (local real estate boom) increased to 150,000 you could buy the house for 100,000 and then sell it for 150,000 for a profit of 50,000. If the price of house price dropped (perhaps crime increase) you would have no incentive to exercise your option to buy, so you let that contract expire (worthless) and you do not buy the house. As illustrated here, the contract derives its value NOT from the paper on which it is written, but from the actual market price of another object (the house in this case). This is the basic premise for instruments of specualation known as derivatives.

Wikinvest © 2006, 2007, 2008, 2009. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki