Unlike standard derivatives instruments, correlation products contain nonseparable risk, meaning that the price … sensitivity of one risk factor is a function of the level of another risk factor. This article outlines the pricing and hedging of … one type of correlation product, the differential swap, to show how nonseparable risk may escape traditional methods of …

Trading volume and open interest in options and futures contracts on stock indices, equities, and interest rate … future stock prices, interest rates, and exchange rates. The positive functions of derivatives as means of risk management …