Other Investment Vehicle Flashcards
a contract between two or more parties whose value is based on an agreed-upon underlying financial asset (like a security) or set of assets (like an index).
Derivatives
Common underlying instruments include
Bonds
Commodities
Currencies
Interest Rates
Market Indexes
Stocks
Use of Derivatives
To hedge risk
Speculation on derivatives is motivated by ______, rather than a desire to ___________.
profit, mitigate risk
Hedgers seek to ____________ by using derivatives as ____________ (indirectly ________________)
limit risk, insurance policies, increasing profitability
Main Types of Derivatives
Forwards
Futures
Options
Swap
A customized contract between 2 parties to buy or sell an asset at a specified future date. its non-standardized nature makes it particularly apt for hedging.
Forwards
standardized agreements that typically trade on an exchange. One party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date
Futures
financial derivatives sold by an option writer to an option buyer. They are typically purchased through online or retail brokers.
Options
Agreed upon price is _____
Strike Price
derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.
Swaps
place where currencies are traded.
Foreign Exchange Market
need to be exchanged in order to conduct foreign trade and business
Currencies
where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment toward ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another.
Spot Market
involves the purchase, ownership, management, rental and/or sale of real estate for profit.
Real Estate investing
