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1.1 A derivative is a financial instrument that relies on another underlying instrument to derive its value. This is explained below by looking at specific types of derivatives.
1.2 Exchange traded and OTC derivatives.
1.2.1 An exchange-traded derivative occurs where the instrument is traded through a recognized exchange. Bonds are traded through the Bond Exchange of South Africa (BESA) and futures though South African Futures Exchange (SAFEX). The rules of the exchange will govern how the instrument is traded and what happens if one of the parties defaults...