what is Credit derivatives,equity derivatives,SWAPS?
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Answer Posted / prasanna11149@yahoo.co.in
Privately held negotiable bilateral contracts that allow
users to manage their exposure to credit risk. Credit
derivatives are financial assets like forward contracts,
swaps, and options for which the price is driven by the
credit risk of economic agents (private investors or
governments).
For example, a bank concerned that one of its customers may
not be able to repay a loan can protect itself against loss
by transferring the credit risk to another party while
keeping the loan on its books.
In finance, an equity derivative is a class of financial
instruments whose value is at least partly derived from one
or more underlying equity securities. Market participants
trade equity derivatives in order to transfer or transform
certain risks associated with the underlying security.
Options are by far the most common equity derivative
[citation needed], however there are many other types of
equity derivatives that are actively traded.
A contract in which two parties agree to exchange periodic
interest payments, especially when one payment is at a
fixed rate and the other varies according to the
performance of a reference rate, such as the prime rate.
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