- 15, Jun 2020
- #1
What are derivative financial instruments. A financial instrument can be any security that may in any way affect the price of goods or services or other securities.
The function of financial instruments is to profit from changes in prices within the market for the owner of this document.
In turn, such documents have their own characteristics. Firstly, the price directly depends on the price of the asset, i.e. another security.
Secondly, like other securities may be the subject of further sale.
Thirdly, the time limit, such contracts can be active from several hours to a year.
Such contracts are practiced in the derivatives market and, accordingly, are just starting to develop.
They were born among farmers who entered into transactions for future products, then such agreements were signed among partners in the oil and metallurgical industries, etc.
Now they are actively used both on the exchange and outside it.
Initially, derivative securities performed exclusively the function of insurance, but over time they became an active profitable product.
In the process of economic development, derivative securities were improved and divided into types, according to the timing of execution, volume and quality of supply, and each of the types received the corresponding name.
Currently, such contracts are called derivatives and are divided into futures, forwards and options. Of course, this is not an exact division and there are many other types, such as swaps, convertible bonds, etc.
The function of financial instruments is to profit from changes in prices within the market for the owner of this document.
In turn, such documents have their own characteristics. Firstly, the price directly depends on the price of the asset, i.e. another security.
Secondly, like other securities may be the subject of further sale.
Thirdly, the time limit, such contracts can be active from several hours to a year.
Such contracts are practiced in the derivatives market and, accordingly, are just starting to develop.
They were born among farmers who entered into transactions for future products, then such agreements were signed among partners in the oil and metallurgical industries, etc.
Now they are actively used both on the exchange and outside it.
Initially, derivative securities performed exclusively the function of insurance, but over time they became an active profitable product.
In the process of economic development, derivative securities were improved and divided into types, according to the timing of execution, volume and quality of supply, and each of the types received the corresponding name.
Currently, such contracts are called derivatives and are divided into futures, forwards and options. Of course, this is not an exact division and there are many other types, such as swaps, convertible bonds, etc.
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