Financial Service Assignment 2 Essay Example | Topics and Well Written Essays - 3000 words

Financial Service naming 2 - Essay Examplevital contributor towards the steadiness with regard to the financial anatomical structure along with being a significant element in the course of operations associated with the existent economy (Department of Mathematics, 2008).The structure of derivatives market in the present times has been learnt to lure increased concentration next to the present environment related to fraud cases, financial crisis along with the collapse of few of the market participants. It was an evident fact that the new financial catastrophe principally occurred because of the planned credit-linked securities which were not actually derivatives. This made the regulators and the policy developers think regarding intensification of the guidelines for boosting the clearness and security for both the wide array of financial instruments as well as derivatives (Department of Mathematics, 2008).Derivatives argon referred as financial look ats the worth of which is co nsidered as a resultant of certain definite underlying assets. The underlying assets are believed to entail equity indices as well as equities, loans, exchange rates, commercial along with residential mortgages, bonds, interest rates, commodities and natural calamities like the hurricanes and the earthquakes. The derivative contracts appear or are available in numerous forms however, the around widespread forms entail forwards or futures, swaps and options (Acharya & et. al., 2009).A forward contract is referred to a certain contract in which the involved two parties comply to trade the definite underlying asset in the future days at a specific point of time which has been ascertained earlier and at a preset price. Thus, the buyer complies today to purchase a definite form of asset in the coming(prenominal) days and the other party i.e. the seller complies to give delivery of that definite asset at the hold and predetermined time. Futures are regarded as standardised form of fo rwards that are capable of being dealt in on the exchange