Derivatives and Fundamentals of Evaluation

Derivatives are financial instruments used to manage risk. They consist of contractual agreements that establish transactions to be executed at a future date. The value of such transactions derive from the price of underlying assets, such as bonds, stocks, commodities, or currencies, explaining the name of such instruments. After describing some forms of derivatives, and markets in which they are traded, the discussion proceeds with the fundamentals of their evaluation. This analysis includes several models and theories applicable to this important and developing endeavor