A derivative instrument (derivative) - is a contract whose price and the nature of the obligations are closely related to the value of the underlying asset. Derivatives are contracts and describe the parties' commitments to meet specific conditions relating to the transfer of the underlying asset.
There are two main types of derivatives:
The value of a derivative instrument indirectly depends on fluctuations in the price of the underlying asset. Derivatives are commonly used to hedge open positions, reduce the impact of price fluctuations, and for speculation.
The OTC version of a futures contract is a forward contract. They are not traded on an exchange; their terms are determined by the parties to the agreement.
Interest rate swaps are derivative contracts between two parties, often between a bank and a company. Both parties create conditions that are not with
A REPO contract (from the English repurchase agreement) is an agreement between two parties, according to which the seller undertakes to sell a certain asset to the buyer, and the buyer undertakes to resell the same asset back to the seller at a higher price at a certain period in the future. Repo contracts are widely used in the financial sector, especially in the debt securities market, and are an important tool for managing liquidity and risk.
SWAP contracts (swap means exchange, translation from English) are financial instruments that allow market participants to exchange payments associated with various financial instruments for a certain period of time.
The most common types of SWAP contracts are interest rate swaps and currency swaps.
An option is a contract that gives the right, but not the obligation, to buy or sell an asset (for example, currency, stocks, futures) at a predetermined price and time.