![]() ![]() Swaps and options differ significantly in that a swap is not traded on exchanges. An option is a right, not an obligation, to purchase or sell a financial asset at a predetermined price on a specified date, whereas a swap is an agreement between two parties to exchange financial instruments.Īnother distinction between swaps and options is that, unlike swap contracts, which only deal in cash flows, options trade securities according to their actual worth. Financial risks are hedged through derivatives. Both sides are required to exchange cash flows in a swap.ĭerivatives, or financial instruments whose value depends on the value of an underlying asset, include both options and swaps. However, if a call option is executed, the seller or writer would be required to sell the underlying asset at a certain price. An option is a right to purchase or sell an asset at a specific date and at a predetermined price, whereas a swap is an agreement between two people or companies to exchange cash flows from various financial instruments. ![]()
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