Tag: Derivative

Interest rate options are financial derivative contracts that enable investors to speculate or hedge against directional changes in interest rates. Interest rate options can be exercised at the strike price of the contract which is a pre-determined rate of Interest. Interest rate options are cash settled. As with equity options, an interest rate option involves a…

A credit default swap (CDS) is a type of credit derivative instrument that protects a buyer from default and other risks associated with debt instruments held by him. Until the credit maturity date, the buyer of a CDS has to pay to the seller a premium on a regular basis. In exchange, the seller guarantees…

A currency futures contract, commonly referred to as an FX futures, is an agreement to exchange one currency for another at a specified future date for an agreed price (exchange rate) that is set at the time of entering into the contract. Although currency futures contracts and currency forwards have many similarities, futures contracts are…