DERIVATIVE SECURITIES

DERIVATIVE SECURITIES:
 The securities whose values are derived from available under line securities.

• Forward Contracts
• Future Contracts
• Optional Contracts

Forward Contracts:

         A contract in which the prices of the commodities and assets decided today and transaction will take place in future at specified rate.

Future Contracts:

        A contract in which the prices of the commodities and assets decided today and transaction will take place in future at specified rate.

                                                           

                                    Difference between forward and future contracts

                      Forward contract                                Future contract

•             Not standard                                      Standardized
•             Over the counter market                   Standardized market
•             No advanced payment                       Advanced payment
•             Unsecure                                             Secure

Optional Contracts:

         Optional contract is a financial instrument in which the person have right to purchase and sell commodities and securities.