Theme by nostrich.
Today I learned a whole lot about finance. Mostly about…
bonds - a debt security where the issuer (seller), usually the government or corporations, is the borrower of money and the buyer of the bond, or the investor, is the lender of the money
and derivatives like options - where you buy the option to make a trade at a certain price in the future (if i buy the option to buy GOOG in 1 year at $700, I can exercise that option and buy the stock at that price no matter what the actual price of the stock is at that time. GOOG is currently $690, and if it rises to say $720 in 1 year and I exercise my option, I can turn around and sell GOOG in the normal market for $720, making a profit of $20 per share!)
forwards - same thing but you are obliged to make the trade in the year; you don’t have the option to back out
futures - which is the same thing but usually done in currencies or commodities, obliging the buyer to take on the commodity or currency (be it corn, the euro, wheat) at a set price at a set future date
and of course swaps - the exchange of one security at a fixed interest rate for another at a floating, or fluctuating interest rate
Piece of cake.
