Posted 20 hours ago

Options, Futures and Other Derivatives: Global Edition

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Employees are sometimes given the option of buying shares from the company at a future date at a predetermined price to compensate them.

Get full access to Options, Futures, and Other Derivatives, 10th Edition and 60K+ other titles, with a free 10-day trial of O'Reilly. Derivatives are majorly used to hedge or to speculate. The following are specific examples of the uses of derivatives. Bridges the gap between theory and practice—a best-selling college text, and considered “the bible” by practitioners, it provides the latest information in the industryA forward contract is a non-standardized contract – traded in an over-the-counter market –between two parties that specifies the price and the quantity of an asset to be delivered in the future. That it’s non-standardized implies it cannot be traded on an exchange. Instead, they are traded in the OTC market. One party takes a long position and agrees to buy the underlying asset at a specified price on the specified date, while the other party takes a short position and agrees to sell the asset on that same date at that same price. There’s always the risk that a trader with instructions to use derivatives as a hedging tool will be tempted to take speculative positions, possibly in the hope of making a “kill’. Such a move can be disastrous for the firm. Options are derivatives that offer the investor the right (but not the obligation) to buy or sell an asset in the future at a fixed price. Options can be found on exchanges and in the over-the-counter market. There are two types of options: call and put options. In addition, you'll have access to Kortext's smart study tools including highlighting, notetaking, copy and paste, and easy reference export.

Get full access to Options, Futures, and Other Derivatives, Ninth Edition and 60K+ other titles, with a free 10-day trial of O'Reilly. In options, such as a European call option, the potential loss is capped at the premium paid, while gains can be unlimited if the underlying asset’s price moves favorably. A futures contract is a standardized, legally binding agreement – traded in on an exchange – between two parties that specifies the price to trade a given asset (commodity or financial instrument) at a specified future date. This course is suited to students wanting to build a firm and in-depth foundation for understanding derivatives, and enhance their technical skills surrounding these.Margins: Daily settlements may not provide a buffer strong enough to avoid future losses. For this reason, each party is required to post collateral that can be seized in the event of default. The initial margin must be posted when initiating the contract. If the equity in the account falls below the maintenance margin, the relevant party must provide additional funds to cover the initial margin. An option contract involves two parties: the party with a long position and a short position in the option.

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