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What are the different types of derivatives?

Curious about derivatives

What are the different types of derivatives?

There are several types of derivatives, including:

1. Futures: Futures are agreements to buy or sell an underlying asset at a future date at a predetermined price.

2. Options: Options are contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time.

3. Swaps: Swaps are agreements between two parties to exchange cash flows based on a predetermined set of conditions.

4. Forwards: Forwards are similar to futures contracts but are customized and traded overthecounter (OTC).

5. Credit derivatives: Credit derivatives are contracts that allow investors to transfer credit risk from one party to another.

6. Interest rate derivatives: Interest rate derivatives are contracts whose value is based on an underlying interest rate.

7. Currency derivatives: Currency derivatives are contracts whose value is based on the exchange rate between two currencies.

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