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The document discusses various derivative instruments, including forwards, futures, options, and swaps. Forwards are private agreements focused on exchange rates, while futures have standardized terms and daily profit/loss assessments. Options provide the holder the right to buy or sell an asset at a predetermined price, and swaps involve exchanging cash flows between parties.

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Veronica Ruchinsky
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2 views

e5516d09e22f494aa5712d2a91a0f30e

The document discusses various derivative instruments, including forwards, futures, options, and swaps. Forwards are private agreements focused on exchange rates, while futures have standardized terms and daily profit/loss assessments. Options provide the holder the right to buy or sell an asset at a predetermined price, and swaps involve exchanging cash flows between parties.

Uploaded by

Veronica Ruchinsky
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Topic 13.

Derivative
instruments
David Eduardo Coral Sánchez
Andrea Valdez Burgos
Anneth López Portillo
Leslie Camacho
Alondra Yukie Pacheco Bastidas
Carolina Vizcarra Leycegui
Sandra Pérez Martos
Sherlyn Gastelum Lizarraga
FORWARDS ARE FORWARD
PURCHASE AND SALE
AGREEMENTS THAT SETTLE
THE PRICE TO WHICH IT
WILL BE PURCHASED AND
THE FUTURE SETTLEMENT
DATE. THE MAIN SUBJECT
MATTER IN THIS TYPE OF
CONTRACT IS THE
EXCHANGE RATE.
Forwards
• They are privately operated.
• There is no fixed location to conduct them.
• As they are contacts in terms of foreign
currency, they are negotiated by financial
institutions authorized to operate foreign
currencies.
• Require a physical delivery.
• Their main disadvantage is that on the
expiration date they are obliged to exercise the
contract, regardless of whether the spot price is
more favorable than the one specified in the
contract or not WesternUnion
Futures
• Futures contracts operate with standardized terms (general
conditions of contract), they have a secondary market and
require a mandatory settlement of collaterals in contribution
or margin accounts with a daily settlement.

20XX título de la presentación 4


What is the difference between a forward and a futures contract?

• A futures contract is the same as a


forward contract, except for one
thing: in a forward contract, the buyer
and seller have profits or losses only
on the settlement day, while in a
futures contract, they can have profits
and losses every day.
• This risk is more noticeable in
forward contracts since there is no
daily market valuation; contrary to
that, futures contracts have it,
substantially reducing the purchase
risk.
Options
Banco de México defines options contracts as:

Derivative financial instruments confer the holder the


right, but not the obligation, to buy or sell an asset at a
strike price on a definite date or within a certain period,
in exchange for a premium payment. The issuer of the
options is obliged to sell or purchase at a fixed price if
the options are executed. When the counterparty
acquires the right to sell, the option is known as a put
option, and when it is the right to buy, it is known as a
call option.

6
Carbaugh defines options
contracts as:
An agreement between a holder (buyer) and a writer (seller) that gives the holder
the right, but not the obligation, to buy or sell financial instruments at any
moment up to a specified date. Even though the holder is not obliged to buy or
sell foreign currencies, the writer is obliged to complete a transaction.

7
Characteristics of this type of
contract:

● They are contracts of purchase or sale of the rights of an underlying asset.


● They acquire intrinsic value when the option is executed; its price is higher
than the price of the underlying asset.
● They accept the sale or purchase of the underlying asset to the option holder
at the strike price during a period or on a settled date.

8
Swaps
Contracts establishing the bilateral obligation of
exchanging cash flows on a future pre-established
date with a nominal or reference value.

Features of this type of contract:

- No fixed location to conduct them.


- Directly negotiated between the advisor and the
investor.

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