Abstract
Since the early 1970s there has been an enormous growth in the use of what is known as derivative instruments. In this chapter we look at three types of derivative contracts: futures, options and swaps, with the aim of introducing the reader to their basic features. In particular, we emphasize how the contracts can be used for both speculative and hedging purposes and the advantages and disadvantages of the various contracts. We also look at basic formulae governing the appropriate pricing of futures and options contracts.
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Selected Further Readings
Black, F. and Scholes, M. (1973) ‘The Pricing of Options and Corporate Liabilities’, Journal of Political Economy, vol. 81, pp. 637–59.
Blake, D. (1990) Financial Market Analysis (Maidenhead: McGraw-Hill).
Cuthbertson, K. (1996) Quantitative Financial Economics (Chichester: John Wiley).
Dufey, G. and Giddy, I. (1994) The International Money Market, 2nd edn (New Jersey: Prentice Hall).
Giddy, I. (1994) Global Financial Markets (Lexington, Mass.: D.C. Heath).
Gorman, M.B. and Kohlhagen, S.W. (1983) ‘Foreign Currency Option Values’, Journal of International Money and Finance, vol. 2, pp. 231–7.
Hull, J. C. (1996) Options, Futures, and Other Derivative Securities, 3rd edn (New Jersey: Prentice Hall).
Kolb, R. W. (1996) Financial Derivatives (Oxford: Basil Blackwell).
Pilbeam, K. S. (1998) Finance and Financial Markets (London: Macmillan).
Walmsley, J. (1996) International Money and Foreign Exchange Markets: An Introduction (Chichester: John Wiley).
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© 1998 Keith Pilbeam
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Pilbeam, K. (1998). Currency Derivatives: Futures, Options and Swaps. In: International Finance. Macmillan Texts in Economics. Palgrave, London. https://doi.org/10.1007/978-1-349-26630-2_13
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DOI: https://doi.org/10.1007/978-1-349-26630-2_13
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-73097-3
Online ISBN: 978-1-349-26630-2
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