Features of Derivatives Securities
The features are discussed in our Derivatives Securities assignment writing help as follows:
- Uses: The derivatives can be used in many usees. They can minimize the risk made by financial exposure. Derivatives can be used for betting on the value of the underlying variable. Finally, derivates can be used to offset the positions in different instruments.
- Leverage: Derivatives enable traders to make market exposure with no or little investment.
- Trading: Derivatives are traded on an organized market or a private treaty in the over-the-counter between two or more than two counterparties.
- Value: The values of derivatives are described in four ways. These are the market price, premium, Profit & Loss, and value.
- Outcomes: Derivatives expire eventually. They do so in response to an event or as per the fixed schedule. Traders might have to do final settlement at the expiration of the derivatives. The settlement includes the exchange of assets or cash between counterparties. Derivative positions may be liquidated through offset or sell before expiration. Some derivatives may be terminated while some can be executed. Once you avail of our writing services you can secure top academic grades.
Types of Derivates Securities
The major kinds of derivatives securities are mentioned in our help for assignment on Derivatives Securities as follows:
Options: Options are contracts that give buyers the right to purchase/sell an underlying asset at a specified price during a period of time. The buyer does not have an obligation to exercise this option. The option seller is called the option writer. The price is called the strike price. American options can be exercised before the expiry of the period while European options may be exercised on the expiration date.
Futures: Futures are standard contracts that allow holders to purchase or sell the asset at a specified date and at an agreed price. The parties to the contract have an obligation to perform a contract. The contracts are traded on the stock exchange. The value of a contract is adjusted as per the market movements.
Forwards: Forwards are similar to future contracts where holders are under obligation to perform them. However, forwards are not standardized and not traded on the stock exchanges. Forwards are available OTC. They may be customized to meet the needs of the parties.
Swaps: Swaps are derivates where two parties exchange the financial obligations. The cash flows are based on the interest rate. One cash flow is fixed and the other one changes depending on the interest rate. The commonly used are the interest rate swaps. They are traded on the OTC and not on the stock exchanges.