O'Reilly logo

Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Options

As the futures graph indicates clearly, the downside risk of buying a future is large if you take a wrong position. A major advantage of an option is to keep the profit potential while limiting your downside risk.

A call option is a right to buy a financial asset at a price fixed today (the exercise price or strike) with delivery at a future date.

A put option is a right to sell a bond at a price fixed today with delivery in the future.

The difference between an option and a financial future stands in one word. The option is a right, while the future is an agreement. As the holder of an option may or may not exercise his right, an option will only be exercised if it brings a gain to the holder of this option.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required