Clearing and Settlement of Derivatives

• Asian or look back, or average rate or average price, options use

a different benchmark than the price of the underlying asset on

expiry to determine if they are in- or out-of-the-money, for exam-

ple the average price of the underlying over the last month.

•‘Barrier options’ is a general term for a family of options, which

are either cancelled or activated if the underlying price reaches a

predetermined level. They are also known as knock-out, knock-in

or trigger options.

• Caps and floors are a series of ‘rollover’ rates agreed whereby the

difference in rates is paid, if applicable at the time of the rollover.

• Collars ...