Solution Manual for Principles of Corporate Finance 14th Edition by Richard B...
Derivatives And New Investment Avenues
1. Derivatives and New Investment Avenues By Kisan Rajpurohit- National Convention, Jaipur
2. School of Thought… By far the most significant event in finance during the past decade has been the extraordinary development and expansion of derivatives and emergence of new investment avenues. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it - a process that has undoubtedly improved national productivity growth and standards of living. – Alan Greenspan, Former Federal Reserve Chairman
6. History of Derivatives Genesis chapter 29 of the Bible in 1700 B.C Jacob purchased an option from Laban costing him seven years of labor. This option gave Jacob the right to marry Laban's daughter Rachel. However Laban, defaulted, perhaps making this not only the first derivative but the first default on a derivative. Jacob did derivatives, one way or the other.
12. Forwards Vs Futures Done on daily basis Not Done Valuation Margins required Not Required Margins Very High Poor Liquidity Exchange Any entity Counterparty Standardized Customized Nature of the contract Futures Forwards
13. Options Is a right But not an obligation To buy or sell something At a stated date At a stated price What is an option?
14. Options: Types Call Gives a right but not an obligation to buy Put Gives a right but not an obligation to sell
