Friday, April 3, 2009

equity financial derivative

while commodity futures and option have existed for long time and the derivative markets in currency and interest-bearing instruments have been exploding over the past two decades ,international equity derivatives have started to be utilized relatively recently .In many countries such as the united states the equity option has existed domestically for many years ,but it is only recently that international option and swaps have become widespread . with an equity swap , an investor can swap the return on a currently owned equity to another investors for a price .as financial markets have globalized ,it is increasingly common to find investors in one country contracting with market insider or agents in another country to buy and hold equities and pass on the foreign investor any gains and losses associated with the equity package for an agent is fee .this derivative allows the international investor to participate in a foreign equity market without having to pay local market execution fees or having to be concerned about the risk of being unfamiliar with local insider trading also protects the identity of the foreign investor.thus ,as in the other derivative markets,the equity derivatives serve to assist the global investor in the management of risk

No comments: