NISM Series XV : Research Analyst Certification Exam Notes
Page 21 Of 62
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Put gives the buyer the right, but not the obligation, to sell a given quantity of the underlying asset at a given price on or before a given date
A swap in the financial markets is a derivative contract made between two parties to exchange cash flows in the future according to a pre-arranged formula. Swaps help market participants manage risks associated with volatile interest rates, currency rates and commodity prices
Trading - Trading or speculating is an act of purchase or sale of an asset in the expectation of a gain from changes in the price of that asset over a short period of time
Hedging- Hedging is an act of taking position in the financial transactions to offset potential losses that may be incurred by another position
Arbitrage is simultaneous purchase and sale of an asset in an attempt to profit from discrepancies in their prices in two different markets. Buying a stock in the spot market and simultaneously selling that in the futures market to benefit from the price differential is an example of an arbitrage transaction
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