Forward Commitment and Contingent Claim Features and Instruments
Free CFA Level I lesson in Derivatives. 11 min read, ~1,609 words.
Forward commitments (forwards, futures, swaps) obligate both parties. Contingent claims (options, credit derivatives) give the buyer a right, not a duty. Long call payoff: max(0, ST − X). Long put payoff: max(0, X − ST). Profit subtracts the premium for the long, adds it for the short. Forwards: OTC, customized...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- forward commitment and contingent claim features
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