There has been a nearly constant conversation on this matter for the past year and a half. Here I’m going to explain derivatives, futures, options in an understandable way.
Derivatives were created to help banks, investors and corporations, to manage risk. Derivatives are:
- Financial arrangements between two groups
- Payment’s to one of these parties are made based off of the performance of an agreed upon price move of an item.
- These items can include: Commodities, Corporate Bonds, Currency, Government Debt, Interest Rates, Mortgages, Stocks, etc.