Mechanics of Swap

Swaps are bilateral agreements between two parties, called counterparties, in which the parties agree to make a series of payments to each other. This agreement or contract is evidenced by a document called a master swap agreement. All swaps regardless …

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Termination of Swap

The different ways in which a swap can be terminated are as follows: By Mutual Agreement or as per Contract Details When a swap contract is initiated, it has zero value. However, as time passes and circumstances change, the swap …

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Characteristics of Swap Contracts

The following are the important characteristics of swap contracts: Basically a Forward A swap is nothing but a combination of forwards. So, it has all the properties of a forwarding contract. Double Coincidence of Wants A swap requires that two …

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Concept of Swap

A swap is an agreement to a future exchange of one asset for another, one liability for another, or more specifically, one stream of cash flows for another. A swap is a private agreement between two parties in which both …

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Basis & Convergence in Futures Contract

The two most important concepts in futures trading are basis and convergence. Basis The relationship between the cash and futures price is known as the basis. In marketing, basis generally refers to the difference between a price in a particular …

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Commodity Futures

Commodity futures contract involves obligations of both parties to perform in the future — the buyer (long) to purchase the asset underlying the future and the seller (short) to deliver the asset. Thus, both the buyer and the seller of …

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Stock Futures

Stock futures are agreements to buy or sell a specified stock, i.e., the equity share of a specified company, in the future at a specified price. An investor, who is interested in purchasing a share, may buy the share in …

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Stock Index Futures

Stock Index future is an index derivative that draws its value from an underlying stock index like Nifty or Sensex. They were first pioneered by the Kansas City Board of Trade on 24th February 1982, and the contract is based …

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Interest Rate Futures

An interest rate future (IRF) is a financial derivative with an interest-bearing instrument as the underlying asset. Interest rate futures means standardized interest rate derivative contracts traded on a recognized stock exchange to buy or sell notional security or any …

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Currency Futures

Currency Futures means a standardized foreign exchange derivative contract traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of the contract but does …

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