CFA L1 / Deriv / M2. Features
Module 2 · Derivatives

Forward Commitment and Contingent Claim Features

EN: Anatomy of forwards, futures, swaps, and options.
VN: Cấu tạo forward, future, swap, option.

1. Forward Contract Concept

  • Definition Bilateral OTC agreement to buy/sell an asset at a future date for a price set today.
  • Long Agrees to buy at delivery price; gains if spot > delivery price.
  • Short Agrees to sell; gains if spot < delivery price.
  • Initial value = 0 at inception; no cash exchanged at start.

2. Futures Contract Concept

  • Standardized Quantity, quality, delivery date.
  • Daily settle Mark-to-market — gains/losses settled daily.
  • Margin Initial margin posted; maintenance margin must be replenished.
  • CCP Clearinghouse acts as counterparty — eliminates default risk.

3. Swap Concept

  • Definition Series of forward-like exchanges of cash flows.
  • Plain-vanilla IRS Fixed-for-floating (e.g. fixed 4% vs SOFR).
  • Notional Reference amount used to compute payments — not exchanged.

4. Option Concept

  • Call Right (not obligation) to BUY at strike K.
  • Put Right to SELL at strike K.
  • Premium Buyer pays seller (writer) at inception.
  • European Exercise only at expiry.
  • American Exercise any time up to expiry.

Practice problem Practice

Practice problem

An investor pays a $3 premium for the right (but not obligation) to buy a stock at $100 in 3 months. What contract type and position?

Show solution
Right but not obligation = option (contingent claim).
Buy at strike = call option.
Buyer (long) pays premium.
Long call option, K = $100, premium $3