Personal Learning Journal
A derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the “underlying”. Some examples of derivatives: Put and call options, forward and futures contracts, mortgage-backed securities, collateralized debt obligations, credit default swaps, and interest rate swaps.
Resources: Futures Forward contract introduction Futures introduction Motivation for the futures exchange Futures margin mechanics Verifying hedge with futures margin mechanics Options American call options Basic shorting American put options Call option as leverage Put as insurance Introduction to the Black-Scholes formula Implied volatility FX Specifics Foreign exchange and trade: Money, banking and central banks
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Notes from Khanacademy – Forward and Futures Contracts: Forward contract Introduction (3:10 mins): Forward contracts help reduces (hedges) volatility. i.e. The price of apples being sold fluctuates year on year from 10-30 cents a lb. This affects the farmer (supply) because some years he’s doing phenomenal but other years he can even cover cost. It also
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