Derivates
“A derivative is like a razor, you can use it to shave and make yourself attractive for your girlfriend, you can slit your throat with it or you can use it to commit suicide.’(Anon.) This statement describes to us the problems, and on the other hand rewards, that the proper use of derivatives can bring. The derivatives market has developed responding to the uncertainty about prices, and therefore provided a means of separating out this price volatility. The tendency of the market to move up or down in what appears to be a random manner has brought about the need for financial products which will protect or hedge the investor against the ill effects of market volatility. Certain types of derivatives called Futures and Options might do just that if used properly. In this essay we look at certain types of derivatives called Futures and Options, and how hedgers / investors make use of them to their advantage as well as where the threats seem to lie when dealing with them in general.These derivative markets allow hedgers to avoid risk by transferring it to speculators who seek it. We have all heard the phrase “keep your options open” and it is along these lines that the Options derivative has arisen. As we know opti
. . .
Some common words found in the essay are:
Disadvantages Options, Danger FT, Clearing House, Futures Options, Stock-exchange LIFFE, Barings Bank, Frank Partnoy, , Stock Exchange, Barings British, futures options, futures contracts, call option, options contracts, underlying security, advantages / disadvantages, investor ability, expiry date, fiasco blood, cause concern, water wall, types derivatives called, derivatives called futures, blood water wall, fiasco blood water,
Approximate Word count = 2175
Approximate Pages = 9 (250 words per page double spaced)
|
 |
