Once new option contracts are listed and traded by market participants, this new market affects importantly the underlying asset market from different edges
So, derivative markets may decrease the level of volatility of underlying assets because they provide an improvement in the way information is transmitted Cox
In financial derivative the underlying asset is a financial asset such as equity shares, bonds, debentures, interest rates, stock index, exchange rate etc 2
The prices of derivatives converge with the prices of the underlying at the expiration of the derivative contract Thus derivatives help in discovery of future
currencies, commodities, credit events and even other derivative securities Depending on the types of underlying, the values of the derivative contracts
But unlike other market trans- actions, derivatives transactions do not involve changes in ownership of the underlying right or interest at the time a
underlying stock, and thus, it is a derivative security An investor would like to buy such a bond because he can make money if the stock market rises
The value of a financial derivative derives from the price of an underlying item, such as an asset or index Unlike debt instruments, no principal amount is
THE EFFECTS OF DERIVATIVES ON UNDERLYING FINANCIAL MARKETS: EQUITY OPTIONS, COMMODITY FUTURES AND CREDIT DEFAULT SWAPS
In this paper we analyse the effect of the introduction of derivatives (futures conditional volatility of the underlying index declines after derivative markets are
taking similar risks through other financial instruments) The value of a derivative contract is determined by the change in value of an 'underlying' asset This