Everything you need to know about Derivatives

I was hoping we could start a thread about derivatives. Just the main points in the clearest way possible for those who dont get it (like me)… So please add any qualitative or quantitative things you think we should know… 1) All swaps - payer or receiver swap refers to if you are paying or receving the fixed rate If you are paying the fixed rate, you are involved in a payer swap. the value of any swap at any time is just the PV of the fixed rate - the PV of the floating rate 2)Equity swap - return on equity asset (stock, index…) is exchanged for a fixed rate payment. 3) All swaps - the value is always based on $1. You discount all of your future payments back to the present day. 4) All PV’s of a futures contract after the next coupon date (or mark to market date) are $1. 5) Know the greeks plus gamma and each of their affects on options. (can’t write them credibly off the top of my head. … Please add

Equity swaps don’t have to be in exchange for fixed payment, they can be in exchange for floating payments or another equity return as well.