what is derivatives and its application in real market?
102388
Examples of derivatives include options, futures, and forwards.\n\nDerivatives evolved from a need to negotiate a price for a future delivery date on farmers crops. The earliest commodity producers: corn, wheat, tulips, etc, used forwards to strike deals for their crops before they had been harvested.\n\nToday, there is a wide spectrum of participants in derivatives markets. Speculators, Hedgers, Investors, Producers, Consumers.\n\nUnless you are a corn farmer, or drill oil in your backyard, I would stick with stocks, bonds and mutual funds for at least ten years before even considering derivatives. They carry significant risks.\n\nA person could make many millions of dollars and never trade a derivative.\n\n(Technically, a purchase agreement on a house is a forward contract. This might be the one big derivative trade for most people.)
577604
The essence of calculus is the derivative. The derivative is the instantaneous rate of change of a function with respect to one of its variables. This is equivalent to finding the slope of the tangent line to the function at a point. Let's use the view of derivatives as tangents to motivate a geometric definition of the derivative
1079680
A hedging instrument is a financial position opposit your other financial positions.  For example you own $100,000 worth of BAC stock and you fear the market may go down because the Fed is raising interest rates.  You do not want to sell your $100,000 worth of BAC because it pays a decent dividend but you would like buy some protection against a possible market drop. So you buy a hedge.  In this case it would be perhaps in the form of buying out of the money put for $100,000 worth of BAC stock, say $5.00 below the current price of the stock.  If the stock falls to say $6.00 below the current price you are protected from any further loss.  If it does not then you are out the price of the put.  And you do not necessarily have to sell your stock at the put price because the value of your put rises as the stock falls and you always sell it for a higher price and keep your stock. \n\nAnother way would be to sell a deep in the money call on $100,000 worth of BAC stock.  That way if the price of the stock falls below the price of the call you are protected down to the price of the call but not below.  But in this case it did not cost you anything.  But if BAC does not fall in price, you will loose your BAC stock. \n\nThere are many other ways to hedge your financial position.  But those two are perhaps the easiest to understand.
290494
go to these links...\nwww.marketresearch.com\nwww.barronscommodity.com\n\nand a good luck...
353839
Learn stochastic calculus and maths modelization first. It's your only way to making consistent profit on the FX. Charts are a great way to "learn" except they have no PREDICTIVE value whatsoever... sounds familiar? ;)
271069
They hedge themselves on the "real" FX markets - by actually trading the amount of money you dealt with in your trade. \n\nAs most internet FX trading is all geared, most of the reputable FX dealers are associated or partnered with a back or investment bank that guarantees those "loans" in your leveraged trade.\n\nThey keep client money in a trust account, if you are profit and you close out your position, you get paid your profit and your capital returned. If you realise a loss, you pay out the loss out of your capital and more if you aren't protected.\n\nSome brokers trade "naked" but I'd rather stay away from those kinds. That is without hedging their position in the market or by executing the position that their client takes in the market.
598379
Enjoy the reading.\n\nThey operate through private placements and restrict share ownership to rich individuals and institutions frees them from most disclosure and regulation requirements that apply to mutual funds and banks.\n\nFor present purposes, three main classes of hedge funds can be identified: \n\nmacro funds, which take large directional (unhedged) positions in national markets based on top-down analysis of macroeconomic and financial conditions, including the current account, the inflation rate, and the real exchange rate; \n\nglobal funds, which also take positions worldwide, but employ bottom-up analysis, picking stocks on the basis of individual companies' prospects; and \n\nrelative value funds, which take bets on the relative prices of closely related securities (treasury bills and bonds, for example).
265502
Maybe this site can help. \nhttp://www.businesschambers.com/sh.cfm?sq=Hedge%20Fund%20Analyst
428240
(m)\n\nA credit derivative is an OTC derivative designed to transfer credit risk from one party to another. By synthetically creating or eliminating credit exposures, they allow institutions to more effectively manage credit risks. Credit derivatives take many forms. Three basic structures include: \n\ncredit default swap: Two parties enter into an agreement whereby one party pays the other a fixed periodic coupon for the specified life of the agreement. The other party makes no payments unless a specified credit event occurs. Credit events are typically defined to include a material default, bankruptcy or debt restructuring for a specified reference asset. If such a credit event occurs, the party makes a payment to the first party, and the swap then terminates. The size of the payment is usually linked to the decline in the reference asset's market value following the credit event. \n\ntotal return swap: Two parties enter an agreement whereby they swap periodic payment over the specified life of the agreement. One party makes payments based upon the total return—coupons plus capital gains or losses—of a specified reference asset. The other makes fixed or floating payments as with a vanilla interest rate swap. Both parties' payments are based upon the same notional amount. The reference asset can be almost any asset, index or basket of assets. \n\ncredit linked note: A debt instrument is bundled with an embedded credit derivative. In exchange for a higher yield on the note, investors accept exposure to a specified credit event. For example, a note might provide for principal repayment to be reduced below par in the event that a reference asset defaults prior to the maturity of the note. \n\nThe fundamental difference between a credit default swap and a total return swap is the fact that the credit default swap provides protection against specific credit events. The total return swap provides protection against loss of value irrespective of cause—a default, market sentiment causing credit spreads to widen, etc.
1173155
Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. Speculation or agiotage represents one of three market roles in western financial markets, distinct from hedging, long term investing and arbitrage.\n\n\nMost non-professional traders lose money on speculation, while those who do make money tend to become professionals\n\nThe service provided by speculators to a market is primarily that by risking their own capital in the hope of profit, they add liquidity to the market and make it easier for others to offset risk, including those who may be classified as hedgers and arbitrageurs.
1123709
I don't know of any but...you may try to visit a business school which teaches fixed income and they may have spreadsheet models that calculate and value various fixed income securities.  I graduated in Finance and I took a fixed income class that valued bonds, MBSs, swaps, bond options, bonds with call options, etc. If you want a simulator for bonds, there is a spread sheet model that calculates bond prices by bootstrapping.  What that does is calculates bond prices compared to a benchmark bond and evaluates if the bond is currently over or underpriced.
925465
I don't think arbitrage exists in a truly efficient market. It's one of the mechanisms outside the market that makes them efficient. \n\nPerhaps you phrased it incorrectly and mean something else?
5875
well, fx cfds are great and hedge funds use them to make millions.. but day trading? the answer above said it.. a losing game.\n\ni think sometime ago i came across a emperical studied that proved day-traders lose everything in the long-run. \n\nsome of the best traders dont over-trade. they don't commit without any goal. \n\ninvestment is key. \n\ncan potentially make lot of money from trading cfds from making 10 trades a year - holding them for sometime -provided u have the margin.. than from day-trading. the money u make today ull lose tomorrow.
986880
Do you want how to derive them or what the derivatives are?\n\nF(x)=a^x  ---> f'(x) = a^x (ln a)\n\nf(x) = sin x ---> f'(x) = cos x\n         cos x      --->           -sin x\n         tan x       ---->           sec^2 (x)\n         sec x      ---->           sec x tan x\n         csc x      ---->           - csc x cot x\n         cot x       ---->            - csc^2 (x)
1183753
There are lots of costs and fees and data charges and computer expenses and software expenses, and even small commissions are a large percentage of a small amount.\n\nTry virtual trading with a simulator at Investopedia.com\nLots of fun and informative.\n\nGood luck.
475684
As I understood your question you need a good book on pricing derivatives. \n\nTry this:\nHull , John - Options, Futures and Other Derivative Securities (5nd Ed.)\n\nSince direct links are not welcome here, you should open www.rapidshared.org -> choose e-books directory -> search for 'derivatives' -> get the direct link and spent couple of minutes reading the demanded chapters.
702204
Wikipedia actually does a pretty good job describing them...\n\nhttp://en.wikipedia.org/wiki/Credit_derivative\n\nNow there has been lots of buzz because there are trillions of dollars of US-based credit derivatives outstanding.  The buzz is because of systemic risk.  That is, if the economy turns sour quickly, the default rates will risk putting a significant part of the speculative end value at zero.  If a hedge fund has levered up and has significant exposure to them, there is chance that significant economic downturn can cause the hedge fund to implode - causing another "Amaranth".\n\nIn terms of how do you use them?  You, as a mere mortal, almost certainly can't.  Credit Derivatives are non-standardized "over-the-counter" securities.  That is, you are buying a specific credit risk (or bundle of credit risks) specific to the underlying security (e.g. someone's chances of defaulting on a loan).  Since they are non-standardized - they are not listed on any exchange. \n\nYou can go long or short on them, but you are going to need lots of capital to get started, a way to access the closed market (e.g. you are a bank, a hedge fund with connections) and a working knowledge to keep from losing your shirt. \n\nThey are primarily used as a hedging tool for the natural long position on credit securities (e.g. the bank).  The bank then packages the loans, splits the loan into different risk tranches (e.g. Z-tranche). In this case, a bank would want to sell off the Z-tranche (the tranche left holding the bag if the loanee defaults) to lower their credit risk.  \n\nCredit derivatives are also used as speculative investments. Investors can buy tranches that are priced attractively, seeking to pick up the profit differential between (for example) the cash flows received net of defaults and the price paid (which has an implied default rate).