Types of Derivative Instruments and markets If you are a registered author of this item, you may also want to check the 'citations' tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.įor technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. You can help adding them by using this form. We have no bibliographic references for this item. It also allows you to accept potential citations to this item that we are uncertain about. This allows to link your profile to this item. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. See general information about how to correct material in RePEc.įor technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789811221590_0006. You can help correct errors and omissions. Thus, the user of an OTC derivative is subject to credit risk or counterparty risk… Suggested CitationĪll material on this site has been provided by the respective publishers and authors. A key difference between exchange-traded and OTC derivatives is that the former are guaranteed by the exchange, while the latter are the obligation of the non-exchange entity that is the counterparty. In fact, one of the keys to the success of OTC derivatives is the flexibility of the payoff structures that can be created.

An advantage of OTC derivatives over exchange-traded derivatives is that they offer asset managers customized solutions for their investment strategy. Exchange-traded derivatives are standardized contracts. That is, there are exchange-traded derivatives and OTC derivatives. Derivatives are either traded on an exchange or in the over-the-counter (OTC) market. There are three general categories of derivatives: (1) futures and forwards, (2) options, and (3) swaps.

Derivative instruments, or simply derivatives, are contracts that essentially derive their value from the behavior of cash market instruments such as stocks, stock indexes, bonds, currencies, and commodities that underlie the contract.

Basic financial derevatives