They are instruments that are part of the capital market, and they are issued by most stock markets in the world. Such standardized contracts have a primary and a secondary market and their scope is a wide array of assets: commodities, foreign currencies, stock indexes, stocks, bonds, etc. The main derivative instruments specific to the international financial markets are: futures, options and swap.
FUTURES CONTRACTS are standardized contracts issued by the stock market granting the holder the right to buy an asset at a later date under pre-set price conditions. An open position on such contracts can be closed through effective delivery (on the maturity date) or prior to the last trading day by taking a position contrary to the initial position. The biggest quality of such instruments resides in the fact that they are performed “money-free”, as the opening of a futures position only requires a minimum margin of 10-15% of the total transaction value.
OPTION CONTRACTS are derivative instruments entitling the buyer to sell or buy an asset at a pre-set price (exercising price) and at a set maturity. This additional right of the option buyer is obtained in exchange for a premium that is initially paid by the buyer. There are two types of options - CALL buying options entitling the buyer to buy the asset on the maturity date, and PUT selling options, entitling the buyer to sell the asset on the maturity date. Options currently also have a varied number of assets as their scope, from commodities to stock indexes or even futures contracts.
SWAP CONTRACTS are instruments through which the payment conditions of certain financial obligations can be changed. The most widely known forms of swap are interest swap changing the interest conditions of a loan and foreign exchange swap changing the currency in which a loan is denominated. The swap is an instrument providing greater flexibility to medium and long term operations on the international financial market.
Despite their high liquidity (as the secondary market thereof is very developed), derivative instruments are included in the category of the most risky and volatile instruments on the international financial market. Such instruments are used by operators both for speculative purposes and in order to cover financial/trade risks (the interest risk, the price risk, the foreign exchange risk).