Options Futures And Other Derivatives What Are Derivatives, Futures, Options And Credit Defualt Swaps In Layman TermS?
What are derivatives, futures, options and credit defualt swaps in layman termS? - options futures and other derivatives
UK Finance Act
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3 comments:
It is a short answer, so here goes! (No one really knows the future, but)
Derivatives and options are very similar, and is probably best handled together.
One possibility is (as proposed), the possibility of selling something in the future at an agreed price. A typical example would be a farmer to sell their potatoes in the next year. We have seen a price with a local supermarket agree to keep everyone at a fixed price. This would be his choice, and usually you can sell the option. If you are a customer (eg food), then you must buy. That's how it works - I think it would not work at all unless you buy!
However, if the farmer has a piece of paper can give you the opportunity to sell 100,000 tonnes of potatoes were at a fixed price, it will sell that piece of paper to another producer. The value of this piece of paper is a derivative because its value from the price of something else (potatoes) is derived.
In fact, if the price of potatoesvery low altitude, then the farmer would be hard to sell on the open market at high prices. If he's selling price, while other people would be willing to sell offer to buy "the right to a certain price" to enable them to 100.00 tonnes of potatoes at a higher price to sell.
After the expression "oil futures" I think the future is very similar to drivatives it because it is intended to give the right to buy or sell at a price in the future.
Credit default swaps are similar to the interest rates on loans. Some companies find it advantageous to their credits with other companies who want to change their situation exchanges, but does not charge for the deposit. For example, you may want to loan a fixed rate, but paying a floating interest rate. If you find a firm with a fixed interest rate loans, and who wants a variable rate that could exchange their loans.
Hope that helps, and not too complicated!
Let's start with the good news: The shares are entitled to participate in the ownership of a company and pay out a portion of their profits as dividends. Bonds are a loan to a company or a government, you will receive the interest and original loan amount refunded. Both trade on the exchange. The value is determined by supply and demand and what someone is prepared to determine pay.
Traded derivatives positions in stocks and bonds. You can buy a business or sell a particular security at a specified price in the future - a future. You can buy or sell the right, but not compelled to do so have - it is an option. There are several other forms of derivatives, some of which are based on stock prices and some indexes. They can be used to stabilize an investment portfolio, but most are produced and sold by speculators.
Similar measures apply to money, but usually at a much larger scale. Banks to regulate trade in large amounts of debt to raise new funds or to gain an advantage. It is this activity especially thaT has gone wrong recently. If you are a mortgage lender, you can sell your old mortgage (loan book). People who buy on the market with these things, are sold or exchanged.
Well, if I am owed money and not pay, you can give me a process, or you can use the debt at a low price to sell a debt collector. In a commercial scale, a bank, the millions of dollars to a company that could not sell the rights to the repayment of the debt that is borrowed. The trading of bad debt will fund always a little more like black magic.
Let's start with the good news: The shares are entitled to participate in the ownership of a company and pay out a portion of their profits as dividends. Bonds are a loan to a company or a government, you will receive the interest and original loan amount refunded. Both trade on the exchange. The value is determined by supply and demand and what someone is prepared to determine pay.
Traded derivatives positions in stocks and bonds. You can buy a business or sell a particular security at a specified price in the future - a future. You can buy or sell the right, but not compelled to do so have - it is an option. There are several other forms of derivatives, some of which are based on stock prices and some indexes. They can be used to stabilize an investment portfolio, but most are produced and sold by speculators.
Similar measures apply to money, but usually at a much larger scale. Banks to regulate trade in large amounts of debt to raise new funds or to gain an advantage. It is this activity especially thaT has gone wrong recently. If you are a mortgage lender, you can sell your old mortgage (loan book). People who buy on the market with these things, are sold or exchanged.
Well, if I am owed money and not pay, you can give me a process, or you can use the debt at a low price to sell a debt collector. In a commercial scale, a bank, the millions of dollars to a company that could not sell the rights to the repayment of the debt that is borrowed. The trading of bad debt will fund always a little more like black magic.
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