Learning Outcome Statements

1. Introduction

a. define a derivative and distinguish between exchange-traded and over-the-counter derivatives;

2. Exchange-Traded versus Over-the-Counter Derivatives

a. define a derivative and distinguish between exchange-traded and over-the-counter derivatives;

3. Forward Commitments

b. contrast forward commitments with contingent claims;

c. define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;

4. Contingent Claims

b. contrast forward commitments with contingent claims;

c. define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;

5. Purposes and Criticisms of Derivative Markets

d. describe purposes of, and controversies related to, derivative markets;

6. Arbitrage

e. explain arbitrage and the role it plays in determining prices and promoting market efficiency.