In this post I will try to explain in very simple everyday terms the four basic derivatives. I will not delve into the details and mathematics of these four instruments, rather than I will provide a quick and (let me repeat it...) simple overview!
(The term "financial" has been omitted since this post does not make any reference to the subject of Calculus)
So... to get started, the four basic derivatives, which all the rest (and more complex) derivatives are based upon, are:
- Forward contracts
- Futures contracts
- Swap contracts
- Option contracts
In order not to make this post too lengthy, I will dedicate a separate post for each of the aforementioned derivatives.
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