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  • Publicado : 4 de noviembre de 2011
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1. Forwards Contracts: A tailored contract between two parties, where payment takes place at a specific time in the future at today's pre-determined price.
Example: Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the price of corn goes to $1 or $100 per bushel. Forward contractscan help reduce volatility in certain markets, but they contain the risks inherent to all speculative investing.
2. Futures: are contracts to buy or sell an asset on or before a future date at a price specified today. A futures contract differs from a forward contract in the manner that while the former is a standardized contract written by a clearing house that operates an exchange wherethe contract can be bought and sold, the latter is a non-standardized contract written by the parties themselves.
Example: The price of a contract on Treasury notes changes in anticipation of a change in interest rates. Expected increases in the rate produce falling contract prices, while anticipated drops in the rate produce rising contract prices.
3. Options: are contracts that give theowner the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) an asset. The price at which the sale takes place is known as the strike price, and is specified at the time the parties enter into the option. The option contract also specifies a maturity date. In the case of a European option, the owner has the right to require the sale to takeplace on (but not before) the maturity date; in the case of an American option, the owner can require the sale to take place at any time up to the maturity date. If the owner of the contract exercises this right, the counter-party has the obligation to carry out the transaction. Options are of two types- Call option and Put option. The buyer of a Call option although has a right to buy a certainquantity of the underlying asset, at a specified price on or before a given date in the future, he however has no obligation whatsoever to carry out this right. Similarly, the buyer of a Put option although has the right to sell a certain quantity of an underlying asset, at a specified price on or before a given date in the future, he however has no obligation whatsoever to carry out this right.Example: A rice investor may buy the commodity at fair market value with the hope of the price rising. He/she may then buy a put contract at a high price in case the price of rice declines. This will limit his/her risk: if the price of rice falls, the investor has the option to sell at a high price, and, if the price of rice rises (especially higher than the strike price of the option), then he/shewill choose not to exercise the option.
4. Warrants: is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date. Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities. Both are discretionary and have expiration dates. The word warrantsimply means to "endow with the right", which is only slightly different than the meaning of option. Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond, and make them more attractive to potential buyers. Warrants can also be used in private equity deals.Frequently, these warrants are detachable, and can be sold independently of the bond or stock. In the case of warrants issued with preferred stocks, stockholders may need to detach and sell the warrant before they can receive dividend payments. Thus, it is sometimes beneficial to detach and sell a warrant as soon as possible so the investor can earn dividends.Warrants are actively traded in some financial...
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