Derivatives Markets Flashcards
(21 cards)
What is a derivatives market?
A place to trade contracts who’s value is based on an underlying asset
What are 6 underlying assets
Stocks, bonds, currency, commodities, interest rates, indices
What are the 4 types of derivatives?
Futures, options, swaps, forwards
What are the 3 purposes of derivatives markets ?
Hedging, speculation, arbitrage
What is a futures market ?
Legal contracts to buy or sell assets at a fixed price on a future date
Why are futures obligated?
The contract must be settled
What are 5 futures commodity markets?
Crude oil, gold, wheat, coffee
What are 2 indices markets ?
S&P 500, Nasdaq
What are 3 futures currency pairs ?
EUR/USD , GBP/USD, JPY/USD
What are 2 interest rate futures markets ?
US treasury bonds, Eurodollar
What is a tradable crypto future ?
Bitcoin futures
What are options ?
A contract that gives the buyer the right but not the obligation to buy or sell an asset at a specific price on or before a certain date
Why are options not obligated ?
As the buyer can sell their asset at a specific price on ir before a certain date
Why are the sellers obligated in options ?
As they have to fulfil the contract if the buyer CHOOSES too exercise the option
What is a call option ?
Right to buy a currency pair
What is a put option ?
Right to sell a currency pair
Why are options flexible?
Buyer can choose exercise or let it expire
What is an option premium?
A price payed up front to buy the option
What benefit does paying a premium give us
Limited risk for buyers
What are the 2 main uses of using options ?
Hedging, speculation
