Derivatives

A contract about the obligation or right to buy/sell on or before a future date. The thing being bought or sold is called the underlier.

Has a value. This derives from the value of the underlier (hence the name).

Underliers

Can be almost anything but in practise normally something fungible and liquid.

Basic types (Vanillas)

Forward

Future

Swap

Option

Markets

quotes - The are the values someone will buy or sell them for:

  • bid - price at which someone will buy
  • ask/offer - the price at which someone will sell

Over the counter OTC

Exchange