Match the following: A) Forward P) at a

Solution

Derivative securities are those whose value depends on the value of another asset (called the underlying asset). The different types of derivatives include forwards, futures, options, swaps etc. A forward contract is a contract to trade in a particular asset (which may be another security) at a particular price on a pre-specified date. Futures are standardized forward contract that are traded on an exchange and where the counter-party (the party with which the contract has been signed) is the exchange itself. Options are one-way contract where one party has the right but not the obligation to trade in an asset at a particular price on a pre-determined date/dates or in a particular time interval. Interest rate swaps are agreements where one side pays the other a particular interest rate (fixed or floating) and the other side pays the other a different interest rate (fixed or floating).