Business Administration - Financial Planning RFC125 Chapter Notes - Chapter 10: Put Option, Call Option, Performance Bond
17 Nov 2016
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Designed to offset the cost of the volatility of the underlying asset by creating a contract between two parties for the agreed purchase and sale of a designated amount of said commodity. Buyer has the right to buy but not the obligation: payment is known as premium. Seller is obligated to sell: option to give owner right to buy is called call option, option to give seller right to sell is called put option. Ice futures canada: futures on agricultural goods. Privacy of otc derivatives no one knows about the transaction vs. transactions on the open market are made public. No upfront payment is required: sometimes one or both parties will make a performance bond or good-faith deposit. Added assurance for other party that terms will be honoured. Resources: metals, livestock, grains and produce. Financial derivative growth has been fueled by the increasingly:
