Derivatives
Financial contracts deriving value from an underlying asset (stocks, rates, etc.).
Detailed Description
Derivatives
What are the primary types of derivatives?
The primary types of derivatives include futures contracts, options, swaps, and forwards.
How are derivatives used for hedging?
Derivatives are used to protect portfolios against adverse price movements, such as a farmer using futures contracts to lock in crop prices.
What risks are associated with derivatives?
Risks include market risk, credit risk, liquidity risk, and operational risk.
Who are the main participants in the derivatives market?
Main participants include hedgers, speculators, arbitrageurs, and intermediaries.
Why is accurate valuation of derivatives important?
Accurate valuation is crucial for effective risk management and informed investment decision-making.