Derivatives

American Options: A Comprehensive Guide to Flexible Exercise Rights
American Options are financial derivatives that can be exercised at any point before their expiration date. This guide provides an in-depth exploration of American Options, including their history, types, key events, and detailed explanations.
American-style Options: Options Exercisable Anytime Until Expiration
American-style options are financial derivatives that give the holder the right to exercise the option at any time before and including its expiration date. This flexibility distinguishes them from European-style options.
Asian Options: Options with Payouts Dependent on Average Price
An in-depth exploration of Asian Options, financial derivatives whose payouts are based on the average price of an underlying asset over a specified period rather than a single price point.
At The Money: Option Trading Term
Describing a call or put option in which the exercise price is the same (or very nearly the same) as the current market price of the underlying asset.
Backwardation: A Comprehensive Guide
Backwardation is a market condition where the futures price of a commodity is lower than the spot price. Learn about its historical context, types, key events, and more.
Barrier Option: A Contingent Derivative
A detailed guide on Barrier Options, a type of option where the payoff depends on whether the underlying asset reaches or exceeds a predefined price level.
Black-Scholes Equation: Valuing Financial Options
An in-depth exploration of the Black-Scholes equation, used for pricing financial options, including its historical context, mathematical formulation, importance, and applications.
Bond Options: Right but Not Obligation to Buy/Sell Bonds, More Flexible but Complex
Bond Options represent a type of financial derivative giving the holder the right, but not the obligation, to buy or sell a bond at a specific price within a specified period. They offer flexibility and complexity in trading and risk management.
Call Option: Understanding the Right to Buy
A comprehensive guide to understanding Call Options, their types, key events, mathematical models, applicability, examples, and more.
CDS: Abbreviation for Credit Default Swap
An in-depth exploration of Credit Default Swaps (CDS), their historical context, types, key events, importance, applicability, examples, and more.
CDX: Understanding Credit Default Swap Index
CDX or Credit Default Swap Index is a financial instrument that provides diversified risk and broad market exposure, and is standardized and traded in the derivative market.
CFDs: Contracts for Difference Explained
Understand CFDs, financial derivatives that allow traders to speculate on price movements without owning the underlying asset. Discover their workings, applications, and distinctions from spread betting.
Chicago Mercantile Exchange: Gateway to Futures Trading
The Chicago Mercantile Exchange (CME) is a global derivatives marketplace that was originally founded in 1898 for trading agricultural commodities futures and has since expanded to include financial futures contracts.
Chicago Mercantile Exchange (CME): Leading Global Derivatives Marketplace
The Chicago Mercantile Exchange (CME) is a leading global derivatives marketplace where various financial instruments are traded, including those facilitated by the electronic trading platform Globex.
Class of Options: Definition and Explanation
A comprehensive guide to understanding the concept of 'Class of Options,' referring to all options of the same type (call or put) for a particular trading instrument.
Clearing Corporation: Financial Stability through Clearing and Settlement
A comprehensive overview of Clearing Corporations and their crucial role in ensuring the integrity and efficiency of financial markets by providing clearing and settlement services.
Commodity Futures: Contracts for Future Commodity Transactions
Commodity Futures are contracts to buy or sell a commodity at a predetermined price on a specified future date, providing a mechanism for managing price risk in commodity markets.
Contract for Differences: A Modern Derivative
A comprehensive guide to understanding Contracts for Differences (CFDs), their historical context, types, key events, formulas, importance, and applications in the financial market.
Credit Risk Transfer: Understanding Shifting Credit Risk
Comprehensive guide on credit risk transfer, including types, key events, mathematical models, diagrams, importance, examples, related terms, and famous quotes.
Currency Option: Financial Derivative for Currency Exchange
A financial derivative granting the right, but not the obligation, to exchange currencies at a predetermined rate on a specified date.
Delta: Rate of Change of the Option's Price
'Delta' measures the rate of change of the option's price with respect to changes in the underlying asset's price. It is a key metric in options trading, reflecting the sensitivity of the option's price to movements in the underlying asset's price.
Delta (Δ): Sensitivity of Option Price to Changes in Underlying Asset Price
Delta, represented by the Greek letter Δ, is a measure of the sensitivity of an option's price to changes in the price of the underlying asset. It is a crucial parameter in options trading and financial derivatives.
Delta: Sensitivity of Option Value with Respect to Asset Price
Delta measures the rate of change of an option's price with respect to changes in the underlying asset's price, indicating its sensitivity to such variations.
Derivative: Financial Instrument and Its Complexities
A detailed exploration of financial derivatives, including types, historical context, key events, formulas, and their impact on financial markets.
Derivative: A Financial Instrument
An in-depth exploration of derivatives, their types, importance, applications, and key events in financial markets.
Derivative Instrument: Financial Security
A financial security whose value is dependent upon or derived from an underlying asset or group of assets. Detailed explanation, types, uses, and examples.
Derivative Market: An In-Depth Analysis
Comprehensive analysis of the derivative market, covering its historical context, types, key events, explanations, mathematical models, importance, applicability, and more.
Differentiation: The Process of Finding the Derivative of a Function
A comprehensive overview of differentiation, including historical context, types, key events, explanations, formulas, charts, importance, examples, related terms, interesting facts, and more.
Digital Options: A Defined Financial Instrument
Digital Options: A financial derivative that pays a fixed amount if the barrier is breached and no payout if it isn’t.
Down-and-In Option: Definition and Overview
A comprehensive guide to understanding Down-and-In Options, their characteristics, examples, and applications in finance.
European Option: An Option Exercisable Only on Expiry Date
A European option is a type of financial derivative that can be exercised only on its expiration date. This is in contrast to American options, which can be exercised at any time before or on the expiry date.
Exotic Financial Instruments: Complex and Customized Financial Products
Exotic Financial Instruments involve complex and often customized financial products that include features like derivatives with path-dependence or multiple contingent outcomes.
Exotic Options: Complex and Non-Standard Financial Derivatives
Exploring the broad category of exotic options, including barrier, lookback, and Asian options, and how they differ from vanilla options in terms of exercise conditions and payoff structures.
Financial Assets: An Overview of Money and Claims
Explore the comprehensive world of financial assets, including types, historical context, mathematical models, key events, and their critical importance in economics and finance.
Financial Instrument: A Comprehensive Overview
A detailed explanation of financial instruments, their types, historical context, accounting standards, and real-world applications.
Financial Options: Contracts Offering the Right but Not the Obligation to Buy/Sell an Asset
Financial options are derivatives that give investors the right, but not the obligation, to buy or sell an asset at a predetermined price before a specific date. This article covers the historical context, types, key events, detailed explanations, and practical examples of financial options.
Forward Contracts: Custom Agreements for Future Transactions
Forward contracts are custom agreements to buy or sell an asset at a specified future date and price, offering flexibility over standardized futures contracts.
Forward Margin: An Essential Concept in Forex Trading
Forward Margin, also referred to as Forward Points, represents the difference between the spot rate and the forward rate in foreign exchange trading.
Forward Rate Agreements (FRA): Understanding Financial Instruments
A comprehensive guide to Forward Rate Agreements (FRA), including historical context, types, key events, explanations, mathematical models, charts, applicability, examples, related terms, and more.
Forwards: Customized OTC Contracts
Forwards are customized contracts traded over-the-counter (OTC) that serve as a financial instrument for hedging and speculation, distinct from standardized futures.
Future Contract: A Standardized Agreement to Trade Commodity at Predetermined Price
A comprehensive definition and explanation of Future Contracts, covering types, examples, and historical context. Learn how future contracts are used in various markets.
Futures Chain: Comprehensive Overview
A detailed examination of Futures Chain, listing all available futures contracts for a commodity or financial instrument, analogous to an options chain but for futures.
Futures Contract: Understanding a Crucial Financial Instrument
A comprehensive exploration of futures contracts, including historical context, key events, detailed explanations, models, charts, applicability, examples, and much more.
Gamma (Γ): Measures the Rate of Change of Delta
Gamma (Γ) is a financial metric that measures the rate of change of delta with respect to the underlying asset's price. It is particularly significant in options trading to evaluate the sensitivity of delta.
Gold Futures: Understanding Contracts for Future Gold Transactions
Gold Futures contracts represent agreements to buy or sell a certain amount of gold at a predetermined price on a specific future date. This comprehensive guide explores their mechanics, types, and applications.
Greeks: Sensitivity Measures in the Black-Scholes Model
Greeks are the sensitivity measures derived from the Black-Scholes formula, including Delta, Gamma, Theta, Vega, and Rho. They provide insights into how option prices are impacted by changes in market conditions.
Hedge: Financial Risk Mitigation
A comprehensive guide to the concept of hedging, including historical context, types, key events, and methods used in financial risk mitigation.
In The Money: Financial Term Explained
An in-depth explanation of the financial term 'In The Money,' its significance in options trading, mathematical models, and real-world examples.
Index CDSs: A Financial Instrument to Mitigate Idiosyncratic Risk
Index CDSs, or Credit Default Swaps, cover a basket of entities, thereby reducing idiosyncratic risk. This article provides a comprehensive overview, historical context, types, key events, mathematical models, and much more.
Interest Rate Derivatives: A Comprehensive Guide
A detailed exploration of interest rate derivatives, including their historical context, types, key events, mathematical models, charts, importance, and practical applications.
Interest-Rate Swaps: An Overview of Interest Payment Exchanges
Interest-rate swaps are transactions where two parties exchange streams of interest payments, typically between fixed and floating rates, or across different currencies.
LCH.CLEARNET: A Central Counterparty Clearing House
An extensive overview of LCH.CLEARNET, also known as London Clearing House, covering its history, role in financial markets, services, significance, and more.
London Inter Bank Offered Rate: A Comprehensive Overview
A detailed exploration of the London Inter Bank Offered Rate (LIBOR), its historical context, significance, applications, controversies, and future outlook.
Long Call: Derivative Trading Strategy for Potential Gains
A Long Call is a bullish options trading strategy that involves purchasing a call option, allowing the buyer to benefit from a potential price increase while limiting risk to the premium paid.
Lookback Options: Options Based on Maximum or Minimum Prices
Lookback options are exotic options where the payoff depends on the maximum or minimum price of the underlying asset over a specified period. They offer unique opportunities for hedging and speculation.
Margin Requirement: Ensuring Financial Stability in Trading
Margin Requirement is the percentage of a transaction value required as a deposit to mitigate risk in financial trades, protecting brokers and exchanges from default.
Marginal Effect: The Impact of Small Changes
Understanding the impact of a small increase in A upon the value of B, defined mathematically as the derivative of B with respect to A.
Marking to Model: A Comprehensive Guide
An in-depth exploration of marking to model in fair value accounting, including historical context, categories, key events, explanations, and examples.
Naked Position: Understanding the Risks and Rewards
An in-depth look at naked positions in finance and trading, including their types, historical context, key events, and practical examples.
Notional Amount: Definition and Importance in Finance
A detailed explanation of the notional amount, its importance in financial instruments, such as derivatives, and how it influences financial markets.
Notional Principal: Definition and Importance
The preset principal amount upon which the exchanged interest payments are based. The hypothetical principal amount on which swap interest payments are based.
NYMEX: New York Mercantile Exchange
An in-depth exploration of the New York Mercantile Exchange (NYMEX), including its history, importance, and functioning within the financial markets.
NYSE Euronext: A Pan-European Stock Exchange
NYSE Euronext, a pan-European stock exchange based in Paris, was formed in 2006 through the merger of Euronext and the NYSE Group. It provides markets for both equities and derivatives across multiple European countries.
Option: Financial Instrument for Hedging and Speculation
An in-depth exploration of options, including types, historical context, key events, mathematical models, importance, examples, and related concepts.
Option: Financial Derivative Instrument
An option is a financial derivative contract granting the holder the right but not the obligation to trade a commodity, share, or currency at a specified price on a future date.
Option Agreement: A Contractual Right to Purchase
An Option Agreement is a contract granting an exclusive right to buy an asset without the need for a third-party offer. This comprehensive definition explores its types, applications, historical context, and much more.
Option Contract: Financial Flexibility and Risk Management
An option contract gives the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period, providing financial flexibility and risk management in various markets.
Option Contracts: Agreements Granting the Right to Buy or Sell an Asset
Option Contracts are agreements that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period.
Options Chain: A Comprehensive Guide to Options Contracts
An options chain lists all available options contracts for a given security. Learn about its historical context, types, key events, detailed explanations, formulas, charts, importance, applicability, examples, considerations, related terms, comparisons, facts, quotes, proverbs, expressions, jargon, and FAQs.
Options Market: Marketplace for Buying and Selling Options
The Options Market is a financial marketplace where options, which are financial derivatives, are bought and sold. This entry explains what an options market is, its function, types, historical context, and its relevance in the financial world.
Other Financial Instruments: Exploring Financial Innovation
A comprehensive exploration of various financial instruments beyond traditional securities, including their types, functions, and relevance in modern finance.
Out of the Money (OTM): A Detailed Examination
Understanding 'Out of the Money (OTM)' options, which have no intrinsic value. For calls, the strike price is above the market price; for puts, it is below.
Out-of-the-Money (OTM): Definition and Explanation
Out-of-the-Money (OTM) options refer to option contracts in which the strike price is not favorable compared to the current market price of the underlying asset. This entry explains the concept of OTM options, their types, and practical examples.
Path-Dependent Options: Options Where Payoff Depends on Price Path
Path-dependent options are complex financial derivatives where the payoff depends on the path taken by the underlying asset's price over time, rather than just its final price.
Put Option: A Financial Instrument for Risk Management and Speculation
A comprehensive guide to understanding put options, their historical context, types, key events, detailed explanations, mathematical models, importance, and applicability.
Redemption vs. Call Option: Financial Instruments Explored
Exploration of the differences and similarities between redemption and call options in the financial world, including historical context, key events, detailed explanations, mathematical models, and practical examples.
Risk Management: Understanding, Evaluating, and Mitigating Risks
A comprehensive guide on risk management, exploring its processes, types, importance, and applications in various sectors such as private, public, banking, and finance.
S&P 500 Index Options: Financial Derivative Instrument
A comprehensive overview of S&P 500 Index Options, which are financial derivatives based on the S&P 500 Index used to derive the VIX, their types, applications, and historical significance.

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