1. FINANCIAL DERIVATIVES/SNSCT/MBA
Options
Options are of two types - calls and puts.
Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date.
Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date.
FINANCIAL DERIVATIVES/SNSCT/MBA

2. FINANCIAL DERIVATIVES/SNSCT/MBA
Options
Further options can be American and European.
A European option can be exercised on the expiry date only.
An American option can be exercised at any time before the maturity date.
Exercise price/strike price: The specified price in option contract.
Exercise contract/expiration date: the date in the contract.
FINANCIAL DERIVATIVES/SNSCT/MBA

3. FINANCIAL DERIVATIVES/SNSCT/MBA
Swaps
Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula.
The two commonly used swaps are:
Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency.
Currency swaps: A swap that involves the exchange of principal and interest in one currency for the same in another currency.
FINANCIAL DERIVATIVES/SNSCT/MBA

4. FINANCIAL DERIVATIVES/SNSCT/MBA
Warrants
Options generally have lives of upto one year, the majority of options traded on options exchanges having a maximum maturity of nine
months.
Longer-dated options are called warrants and are generally traded over-the-counter.
FINANCIAL DERIVATIVES/SNSCT/MBA

5. FINANCIAL DERIVATIVES/SNSCT/MBA
LEAPS
The acronym LEAPS means Long-Term Equity Anticipation Securities.
These are options having a maturity of upto three years.
FINANCIAL DERIVATIVES/SNSCT/MBA

6. FINANCIAL DERIVATIVES/SNSCT/MBA
Baskets
Basket options are options on portfolios of underlying assets.
The underlying asset is usually a moving average of a basket of assets.
Equity index options are a form of basket options.
FINANCIAL DERIVATIVES/SNSCT/MBA

7. FINANCIAL DERIVATIVES/SNSCT/MBA
Relaxes
FINANCIAL DERIVATIVES/SNSCT/MBA

8. Types of Derivatives/Product
Forwards
Futures
Options
Warrants
LEAPS - Long-Term Equity Anticipation Securities
Baskets
Swaps
FINANCIAL DERIVATIVES/SNSCT/MBA