Options Futures and Other Derivatives

Introduction

derivatives - financial instruments whose value is derived from the value of an underlying asset
options - derivatives that give the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date
futures - derivatives that obligate the buyer to buy or sell an asset at a specified price on a specified date
swaps - derivatives that obligate two parties to exchange cash flows derived from different assets
call option - option to buy
put option - option to sell
American style - can be exercised at any time before expiration
European style - can only be exercised at expiration