![]() Hence, there is an increase chance of counterparty credit risk. This means that the exchange is not an intermediary to these transactions. However, a forward contract takes place between two counterparties. ![]() The price at which this transaction will take place is decided in the present. A forward contract is nothing but an agreement to sell something at a future date. Also, they are the oldest form of derivatives. In this article, we will list down and explain those 4 types: Type 1: Forward Contractsįorward contracts are the simplest form of derivatives that are available today. These four categories are what we call the 4 basic types of derivative contracts. However, these variations can all be traced back to one of the four categories. True, that there are hundreds of variations in the market. This may make it seem like a difficult and confusing task to deal with derivatives. ![]() There are hundreds or even thousands of types of contracts that are available in the market. ![]() Today, if a new person wants to buy a derivative contract, they will be bewildered at the sheer amount of choice that they will have at their disposal. ![]() In the previous articles we discussed about what derivative contracts are and what are the uses of such contracts? However, one important point needs to be noticed. ![]()
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