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Derivative finance - Cash flow |  | Derivative finance - Cash flow: Encyclopedia II - Derivative finance - Cash flow |  | The payments between the parties may be determined by:
the price of some other, independently traded asset in the future (e.g., a common stock);
the level of an independently determined index (e.g., a stock market index or heating-degree-days);
the occurrence of some well-specified event (e.g., a company defaulting);
an interest rate;
an exchange rate;
or some other factor.
Some derivatives are the right to buy or sell the underlying security or commodity at some point i ...
See also:Derivative finance, Derivative finance - Types of derivatives, Derivative finance - OTC and exchange-traded, Derivative finance - Common contract types, Derivative finance - Examples, Derivative finance - Cash flow, Derivative finance - Valuation, Derivative finance - Market price and fair value, Derivative finance - Determining the market price, Derivative finance - Determining fair value, Derivative finance - Usages, Derivative finance - Insurance and hedging, Derivative finance - Speculation and arbitrage, Derivative finance - Pricing and information sharing, Derivative finance - Opinions, Derivative finance - Glossary, Derivative finance - Associations, Derivative finance - Lists, Derivative finance - Footnote |  | | Derivative finance, Derivative finance - Associations, Derivative finance - Cash flow, Derivative finance - Common contract types, Derivative finance - Determining fair value, Derivative finance - Determining the market price, Derivative finance - Examples, Derivative finance - Footnote, Derivative finance - Glossary, Derivative finance - Insurance and hedging, Derivative finance - Lists, Derivative finance - Market price and fair value, Derivative finance - OTC and exchange-traded, Derivative finance - Opinions, Derivative finance - Pricing and information sharing, Derivative finance - Speculation and arbitrage, Derivative finance - Types of derivatives, Derivative finance - Usages, Derivative finance - Valuation, Derivatives markets, Financial engineering, Financial mathematics, Herfindahl index, Financial Leverage |  | |
|  |  | Derivative finance: Encyclopedia II - Derivative finance - Cash flow
Derivative finance - Cash flow
The payments between the parties may be determined by:
- the price of some other, independently traded asset in the future (e.g., a common stock);
- the level of an independently determined index (e.g., a stock market index or heating-degree-days);
- the occurrence of some well-specified event (e.g., a company defaulting);
- an interest rate;
- an exchange rate;
- or some other factor.
Some derivatives are the right to buy or sell the underlying security or commodity at some point in the future for a predetermined price. If the price of the underlying security or commodity moves into the right direction, the owner of the derivative makes money; otherwise, they lose money or the derivative becomes worthless. Depending on the terms of the contract, the potential gain or loss on a derivative can be much higher than if they had traded the underlying security or commodity directly.
Other related archivesAlan Greenspan, BIS, Bank for International Settlements, Barings Bank, Bilateral Netting, Binomial options model, Black-Scholes formula, Chicago Board of Trade, Chicago Mercantile Exchange, Credit derivative, DARPA, Derivatives exchanges, Derivatives markets, Economists, Energy derivative, Eurex, Fair value, Federal Reserve Board, Financial Leverage, Financial engineering, Financial mathematics, Forwards, Freight derivative, Futures, General Electric, Herfindahl index, Initial margin, International Swaps and Derivatives Association, KOSPI, Korea Exchange, List of finance topics, Long-Term Capital Management, Market price, New York Times, Nick Leeson, Notional amount, Options, Over-the-counter, Policy Analysis Market, Swaps, Warren Buffett, Weather derivatives, accounts payable, accounts receivable, arbitrage, assets, billion, common stock, consumer price index, contract, credit risk, defaulting, economic downturn, economic system, exchange rate, exchange rates, exotic options, financial, financial mathematics, forward rate agreements, futures contracts, hedge fund, hedges, insurance, interest rate, interest rates, minority interests, option, options, preferred stock, retained earnings, risk, short, stochastic process, stochastics, stock market index, subordinated debt, swaps, tier 1, tier 2, underlying, valuation of options, volatility, weapons of mass destruction, zero-sum
 Adapted from the Wikipedia article "Cash flow", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki |
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