AFM121 Chapter Notes - Chapter 10: Mutual Fund, Open Outcry, Options Clearing Corporation

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM121
• Professor: Craig Geoffrey

Document Summary

Derivatives are so called because they derive their value from the price of another underlying asset, such as a stock, stock or bond index, commodity price, etc. Suitable for hedging or speculative purposes by more sophisticated investors, also extensively used by institutional investors. Ias dealing with derivatives require additional research, specialized knowledge, and particular skills, required to take special courses. Derivatives trade on exchanges and in the otc market. Key diferences are listed: exchange traded: Standardized contracts, public, ease of early termination, clearing house provides third-party guarantee, heavy regulation, used by retail, institutional, corporations. Overseen by provincial securities regulators, iiroc, and exchanges: otc. Customized contracts, private, early termination diicult, default risk no guarantee, gains/losses settled at the end of the day, much less regulation, used by corporations and inancial institutions. Two main categories of underlying assets: commodities (wheat, corn, canola, energy products, industrial products, etc. , financials (equities, interest rate products, currencies)