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Choose one derivative product: credit default swap, interest rate swap, currency swap, forwards, futures or any...

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Finance

Choose one derivative product: credit default swap, interestrate swap, currency swap, forwards, futures or any other derivativesecurity you found interesting.

definition of the instrument, simple explanation how theinstrument works, as well as description of potential investor`sprofiles (i.e who and why usually buy the instrument)

Answer & Explanation Solved by verified expert
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Options Definition Options are derivative instruments that give the buyer the right but not the obligation to buy or sell the underlying asset at a predetermined price known as the Strike price or Exercise Price at a specified date in the futureknown as the expiry or the maturity date Since the buyer of an option has the right but not the obligation to buy or sell the underlying asset therefore to purchase this right the buyer has to pay the seller a price at the time of entering the contract known as the premium Before we understand how an option works we need to know about the two broad types of options Call OptionCall option is a type of option wherein the option buyer has the right and not the obligation to buy the underlying    See Answer
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