Financial Services Lecture 4 Derivatives：金融服务讲座4衍生物

Financial Services Lecture 8: DerivativesGeneral:Derivatives are financial contracts whose value is

FinancialServicesLecture8:Derivatives General: 1) Derivativesarefinancialcontractswhosevalueisbasedonthevalueofsome price underlyingasset.Thevalueisusuallyafunctionofasset,andthecontract alwayshasapredeterminedlifespan—itexpiresatsomepoint.Thisiscalled expiration . 2) twobasictypes Thereareofderivativecontracts:ForwardorFuturescontracts,and agreementtobuyanasset Options.ForwardsandFuturesareanatapredetermined “option”to price,sometimeinthefuture.Optioncontractionsgivetheholderthe buyButdonotcreateanobligation thatassetatapredeterminedprice.. 3) Derivativesmaybeusedforspeculativepurposes,e.g.gambling,orforinsurance purposes,e.g.hedging.Thecontractspermitustobetontheoccurrenceofanevent, betinsurance orbuyprotectionagainstit.Forexample:wecouldmakeaon,orbuy against,theS&Ptumbling500points. 4) Wecanalsousederivativestofixthepriceofanassetseveralmonths(oryears)in advance.Thiscanbeenormouslyvaluableifyou’reawheatfarmer,areabouttoby seed,andwishtolockin(withcertainty)yourprofit.Derivatives,inthisexample, canallowafarmertominimizehisrisk. 5) Fromhereon,wewillfocusonfinancialderivatives—derivativesonfinancialassets. However,mostofwhatwewilltalkaboutisalsoapplicabletocommodities,orother underlyingparameters.