Derivatives are financial contracts whose values depend on or are derived from, the value of an underlying asset, reference rate or return, or index (for example, the S&P 500), and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, and indexes comprised of these types of assets. Examples of derivative instruments include options, futures, forward currency contracts, options on futures contracts, and swap agreements.

 Why are derivatives used in investment portfolios?

Derivatives can be used for multiple purposes, such as to reduce risk (hedging), lower costs (such as transaction costs), and to potentially increase returns. Which derivatives are used and how they are used may depend on the investment manager’s objectives and strategy.

This course is focusing on the different types of derivative products, their applications, their pricing and their risk factors.