Derivatives
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
One-liners from this chapter
Free sample — 8 of 88 rapid-fire Q&A cards.
Financial market underlying?
interest rates, foreign exchange, equity prices, credit spreads.
Commodity market underlying?
gold, silver, crude oil, agricultural products.
Index underlying?
Nifty 50, Bank Nifty, MIBOR, USD/INR fixing.
Hedging or Safeguard?
protect existing positions / cash flows from adverse market movements (the risk management use).
Speculation?
profit from anticipated price movements without owning the underlying (the risk-taking use).
They are settled at a future date?
the cash flow / delivery happens not today but on a specified future maturity / settlement date.
Risk Transfer?
Derivatives shift the risk from the buyer of the derivative product to the seller and as such are very effective risk-management tools.
Improve Liquidity?
Derivatives improve the liquidity of the underlying instrument and perform the economic function of price discovery.
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