Derivative securities

Derivative securities are such papers which are derivative of other securities, for example shares and bonds. To derivative securities carry depository receipts, options, warrants and futures. Derivative securities are based on acquisition of income from a price spread.

Such derivative securities as an option represent the bargain which grants the right of buying or sale of securities under the fixed price for a certain space of time. That yields an option. For example the investor predicts that the security will rise in price. If to take shares, having paid for them at once, the great sum of money is required. But if to take an option for these shares it is not required to pay a full amount at once. If expectations of the investor appear incorrect and shares will fall in price, the investor can withdraw from a bargain and will incur the loss only at a rate of the paid award for an option. If shares have really risen in price, the investor can purchase them under the fixed price and to sell under the new, more expensive price, thereby having got profit, without putting originally great sums of money and having reduced scratches.

Such derivative securities as financial futures represent the contract on buying or sale of securities under the fixed price for certain date. A difference between an option and the future that the future is the contract bearing the obligations. And the option is an option. I.e. at an option it is possible to refuse buying. Derivative securities warrants - are manufactured by the companies which are emitters of primary securities. Warrants also grant the right to purchase in the future securities under the fixed price. They differ from options the big terms or term even can be and unlimited.

Depository receipts are derivative securities from the basic securities which address in the foreign markets. Routinely shares are stored in the country where there is an issuing company, and in the foreign markets depository receipts to these securities address. At depository receipts high degree of liquidity, as well as at shares under which they are manufactured. Depository receipts allow to involve investments on foreign capital markets.


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