Archive for the ‘DERIVATIVE MARKETS’ Category

ELEMENTARY PRINCIPLES OF DERIVATIVE PRICING

Tuesday, July 7th, 2009

In this post, we take a preliminary glance at how derivative contracts are priced. First, we introduce the concept of arbitrage. Arbitrage occurs when equivalent assets or combinations of assets sell for two different prices. This situation creates an opportunity to profit at no risk with no commitment of money. ...

CRITICISMS OF DERIVATIVE MARKETS

Monday, June 22nd, 2009

Derivatives have been highly controversial for a number of reasons. For one, they are very complex. Much of the criticism has stemmed from a failure to understand derivatives. When derivatives fail to do their job, it is often the derivatives themselves, rather than the users of derivatives, that take the ...