Derivative securities, General characteristics
Derivative securities - Express property rights in uncertificated form (obligations), associated with the change of prices, which lies in the basis of the security of the asset.
I.e., derivative securities - this contract at any price assets: commodity prices (typically, commodity: grain, meat, oil, gold, etc.); the prices of the main securities (usually, the bonds, the index of shares); - the price of the credit market (interest rates); the prices on the foreign exchange market (foreign exchange rates), etc.
In this financial instrument includes: freely tradable swaps, options and futures contracts (index, interest rate, currency, commodity, etc.).
Derivative securities
The emergence of derivative securities and their circulation is connected with the search of the optimal investment strategy, which could provide not only profit, but also insurance of risks due to adverse price changes, i.e., the solution of the problem for the placement of free monetary assets.
Today derivative financial instruments, the most dynamically developing segment of the world financial market. A powerful impetus for the development of international stock and currency market of the given factors such as the achievement of a new level in the telecommunications and computer technology, fast the continued growth of world trade in goods and services, deregulation in the financial sector at the state level, the transition to a floating exchange rate and other processes.
Operations on investments have become really international, however, such investment is associated with an increased risk of - risk of growth or fall of interest rates on deposits, the change in the exchange rate, fluctuations in stock prices, etc., therefore, the need to develop derivative financial instruments, as a segment for the insurance of such risks.
General characteristic of derivative securities
1prices for them are based at the expense of the prices, which lies in the basis of their stock of the asset, the asset may be of securities (shares), foreign exchange and commodity indices etc;2) in the form of circulation - alike the securities;
3) are limited to time of existence (a few minutes or a few months - the date of expiration) in contrast to the main securities (bonds - years and decades, share - demand);
4) in comparison with other securities gain on sale and purchase with minimum investments can be high, since the investor pays only warranty contribution (margin), and not the entire cost of the asset.
To the derivative are two basic types of instruments:
1) stock options;
2) futures contracts.
