Archive for the ‘DERIVATIVE MARKETS’ Category
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. ...
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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 ...
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Sunday, June 7th, 2009
Derivative markets serve a variety of purposes in global social and economic systems. One of the primary functions of futures markets is price discovery. Futures markets provide valuable information about the prices of the underlying assets on which futures contracts are based. They provide this information in two ways. First, ...
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