Derivatives
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is a derivative instrument in finance?
A derivative is a financial contract whose value is derived from an underlying asset such as stocks, bonds, commodities, currencies, interest rates, or market indices.
What is a commodity derivative?
A derivative whose underlying asset is a physical commodity.
What are the four main types of derivative contracts?
The four main types are forwards, futures, options, and swaps, each differing in their structure, obligation, and settlement mechanism.
What is the underlying asset in a derivative contract?
The asset on which the derivative's value is based.
What is a forward contract?
A forward contract is a customised, OTC agreement between two parties to buy or sell an asset at a specified price on a future date, with no daily mark-to-market settlement.
What is the expiry date in a futures contract?
The date on which the futures contract settles or expires.
How does a futures contract differ from a forward contract?
A futures contract is standardised, exchange-traded, and subject to daily mark-to-market settlement, unlike the privately negotiated, non-standardised forward contract.
What is a 'long position' in derivatives?
Buying a derivative contract expecting prices to rise.
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