This paper work will focus on four types of derivatives and analyze their characteristics and their operation for the purpose of understanding the financial crisis in 2007-2008, the credit default swaps in the financial market will be defined. The link between credit default swaps and financial crisis will also be explored. The governments’ policies in order to take control over the derivatives in financial market will be mentioned. In the conclusion part, the advantages and disadvantages of derivatives will be discussed.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Derivatives
- Definition
- Usage of derivative contracts in basic strategies
- The common types of derivatives
- Futures and forward
- Basic characteristics and differences
- Futures and forward pricing
- Hedging, speculating using futures and forward
- Hedging
- Speculating
- Swaps
- Basic characteristics
- Four basic types of swaps
- Interest rate swaps
- Currency swaps
- Credit swaps
- Commodity swaps
- Swaps pricing
- Options
- Basic characteristics
- Options strategies
- Call option
- Put option
- Option valuation
- Intrinsic and time value
- Binomial option pricing
- Black-Scholes valuation
- Futures and forward
- Credit default swaps and the financial crisis 2007 - 2008
- Credit default swaps on companies
- Credit default swaps on subprime mortgage-backed securities
- The financial crisis 2007-2008
- The operation of securitization
- Why did the financial crisis happen?
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper explores the concept of derivatives and their role in the financial crisis of 2007-2008. The work aims to provide a comprehensive understanding of various derivative types, their applications, and their implications for financial markets.- The definition and role of derivative securities in financial markets
- The characteristics and workings of different types of derivatives, including futures, forwards, swaps, and options
- The role of credit default swaps in the financial crisis of 2007-2008
- The analysis of the financial crisis and its causes, focusing on the contribution of derivatives
- The advantages and disadvantages of derivatives in the financial market
Zusammenfassung der Kapitel (Chapter Summaries)
The paper begins with an introduction that establishes the importance of derivatives in financial markets. It highlights the increasing use of derivatives and their potential risks, as exemplified by the 2007-2008 financial crisis. The second chapter delves into the definition of derivatives, exploring their role in risk management, profit generation, and investment diversification. It discusses the various types of derivatives, including forwards, futures, swaps, and options. The third chapter examines the specifics of futures and forward contracts, including their characteristics, pricing mechanisms, and applications in hedging and speculating. The fourth chapter focuses on swaps, outlining their characteristics, different types, and pricing methods. The fifth chapter explores the concept of options, providing an overview of their basic characteristics, strategies, and valuation methods. The sixth chapter analyzes the role of credit default swaps in the financial crisis of 2007-2008. It examines their impact on both companies and mortgage-backed securities, and analyzes the causes of the financial crisis.Schlüsselwörter (Keywords)
The central keywords in this paper are derivatives, financial instruments, financial markets, risk management, hedging, speculation, arbitrage, financial crisis, credit default swaps, subprime mortgages, securitization, and government policies. This paper focuses on the analysis of derivative securities, their impact on the financial crisis of 2007-2008, and their potential benefits and risks in financial markets.
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- Hong Hanh Tran (Author), 2013, Derivatives. Curse or Blessing?, Munich, GRIN Verlag, https://www.grin.com/document/213058