What are derivatives: explained in simple terms in an understandable language. Derivative financial instruments: concept, classification Two main types of options are "call" and "put", both of which can be sold and bought

Greetings to regular readers and first-time visitors!

Derivatives is a collective name for a whole group of financial instruments. The textbooks go straight to the details and actually build a house without a foundation. But it is enough to understand the principle of work in order to use derivative transactions with a profit.

A derivative is an auxiliary financial instrument, an agreement on an event that will occur in the future.

The main financial instrument: buying and selling. If an investor buys securities, invests in gold coins, real estate, the transaction takes place today. And there is the end result (a stack of stocks, a stack of coins and a chic hotel).

When you need to get a guarantee of a sale or purchase in the future, or the right to buy in the future at a certain price, the result will also be later. I want to buy horse harness. The master has a turn for six months ahead. We sign an agreement that he will sell the saddle at a fixed price in six months.

I will receive the goods in the future, but I already have a derivative (guarantee).

Features and functions

How not to get confused whether the deal is a derivative or not? Its features:

1. There is a basic basis for the transaction (material values).
2. The sale and purchase will take place at the agreed time in the future.
3. A small investment (guarantee fee) may be required.

The main function of derivatives is insurance (hedging), protection against future risks of not selling a product or not buying it at an attractive price.

And this is an opportunity to earn! Financial speculation in derivatives (not with the aim of buying a product later, but finding someone who wants it and selling him a contract now) has formed a separate market.

Examples

We regularly encounter derivatives without even knowing it. In the store, I ask you to postpone the item you like for a day, the seller agrees not to sell the goods until the evening and not to change the price. Both are happy. I will definitely buy, he is guaranteed to receive money.

If the cost of the goods is high, I make a deposit (apartment, car). This is also a derivative transaction: the actual purchase will take place in the future, but there is an agreement on it now.

In business, the scale of prices is greater, but the principle itself does not change. In agriculture, the farmer plans the crops to plant with the sale in mind. At the end of winter - beginning of spring, he concludes an agreement on the supply of crops at a price that he considers profitable, and can work calmly.

A representative of a supermarket chain worries about a large batch in advance in order to gain a competitive advantage, and in the end he knows exactly what will be provided with the same carrot-cabbage.

Kinds

Over the past 25 years, derivative transactions in the financial market have shown an increase in quotations. The most popular types:

1. Options - financial instruments, giving the right to buy or sell an asset for a certain price at a predetermined date. An option in our life: after purchasing a product, the owner has the right to buy a second item at a discount until the end of the promotion. Whether he buys or ignores the offer, who knows.
2. Futures - contractual obligations (contract), where one party buys and the other sells at a specified price in the future (but the goods are not yet available). Example: production contract (batch for a specific buyer).
3. Swaps are transactions delayed in time for both buying and selling at the same time. In fact, the prolongation of the contract: the year ended, the contract was extended on the same terms. Currency swaps are used on the exchange. An open transaction for a currency pair at the end of the day is closed and opened again (transfer of the transaction through the night).
4. Forwards are derivative transactions similar to futures, but the forward cannot be cancelled.

They also use interest, credit derivatives, as well as insurance, weather, energy.

Derivative Terms

Derivatives necessarily fix the price and execution time in the future. Everything else, including the terms of termination, depends on the type of derivative financial instrument.

Advantages and disadvantages of using

The popularity of derivatives transactions is growing with the improvement of the investment climate. Forward contracts have become commonplace when buying housing in a new building at the construction stage. Main advantages:

1. Receipt Guarantee material assets in future.
2. The risks of a double sale, non-completion of settlements are minimized.
3. Simplified accounting and tax accounting.

But pitfalls, like any financial instrument, are present:

1. There is no single set of rules. The legislation of different countries regulates trading using derivatives in different ways.
2. In international contracts, fluctuations in exchange rates increase the risk of derivative transactions.
3. Many factors affecting the price are completely unpredictable (weather conditions, government policy, strike, etc.)

Conclusion

Knowing the principle of the derivative, it is easy to understand how its types work and where the financier's profit comes from. It turns out there is nothing to worry about.

That's all for today. If you want to become a cool investor, subscribe to articles and like it. Good luck in the wilds of finance!

Also considered the nuances accounting Derivatives when assessing, recognizing, changing the fair value of derivatives, derecognizing derivatives, accounting for deliverable derivatives, accounting for swap transactions, accounting for collateral. Some of the nuances of reflecting hedging operations in the bank's statements in accordance with changes in their accounting are touched upon.

In July of this year, the Bank of Russia approved two new documents: Regulation No. 372-P dated 04.07.2011 "On the procedure for maintaining accounting for derivative financial instruments" (hereinafter - Regulation No. 372-P) and Instruction No. 2654-U dated 04.07.2011 " On Amendments to Bank of Russia Regulation No. 302-P dated March 26, 2007 “On the Rules for Maintaining Accounting in Credit Institutions Located in the Territory of Russian Federation”” (hereinafter - Instruction No. 2654-U, Regulation No. 302-P). The first document is devoted to the principles of recognition and valuation of derivative financial instruments (hereinafter referred to as DFI), and the second one is devoted to the actual accounting of transactions with such instruments.

The main provisions of these documents were commented on in the article by A.Yu. Beregovoy "Accounting of operations with derivative financial instruments" 1 . We will supplement the published comment by considering some important nuances.

It cannot be said that previously there were no regulatory requirements regarding the accounting of derivatives. For example, Bank of Russia Regulation No. 55 dated March 21, 1997 “On the Procedure for Maintaining Accounting for Purchase and Sale Transactions of Foreign Currency, Precious Metals and Securities in Credit Institutions” (hereinafter Regulation No. 55) was in force for quite a long time. It was quite simple, containing a few basic definitions and a number of examples that served as a practical guide. I must say that this Regulation has been quite a reliable tool for accounting purposes for quite a long time. Moreover, accounting has not fundamentally changed even now, except for changes in account numbers.

After the abolition of Regulation No. 55, accounting was regulated by Regulation No. 302-P, which, however, did not contain significant innovations.

Innovations in Derivatives Recognition: Internal Documents, Active Market Qualification

Regulation No. 372-P provides for the availability of special internal documents in a credit institution relating to work with derivative financial instruments (clause 1.6 of Regulation No. 372-P). Previously, there was no such requirement, meanwhile, its importance is great. Now the regulator requires the credit institution to determine in its internal documents the decision-making procedures, the distribution of rights, duties and responsibilities between officials from the date of initial recognition of derivatives to the date of derecognition of derivatives. Moreover, as follows from the text of Regulation No. 372-P, internal documents must contain a number of other judgments and assumptions. So, in paragraph 2.1, the term “active market” is found, but a very vague definition of what is meant by an active market is given. This refers to the presence of two factors: the regularity of transactions and the availability of information about quotes. Admittedly, international standards, in particular IAS 39 “Financial Instruments: Recognition and Measurement”, do not explain the concept of an “active market” much more specifically.

In the same paragraph, the Bank of Russia invites the credit institution to independently determine the characteristics of an active market, which must also be approved in internal documents. Further in the text of Regulation No. 372-P, some signs of a market that cannot be called active are given, namely:

— significant compared to the period when the market was recognized as active, a decrease in the volume and level of activity in transactions with derivatives;

- a significant increase in the difference between bid and offer prices, a significant change in prices over a short period of time;

— lack of information about current prices for this derivative.

In this case, the credit institution must determine the materiality criterion independently.

The signs are fairly general. So, for example, the criterion of a decrease in activity compared to the period in which the market was active resembles a vicious circle, since it brings us back to the search for a definition of the concept of an active market. An increase in the difference between bid and offer prices, it would seem, is a completely logical and easily observable criterion. But what if the auctions are uneven, that is, quotes for buying and selling are set during the day, the difference between them is noticeable and transactions are obviously not concluded? However, as prices for the underlying asset change, the market situation during the day may change so that for the buyer or seller of the instrument, for which there was a difference in bid and offer prices, the price becomes profitable and transactions are nevertheless concluded. In other words, is it possible to recognize the market for derivatives as active if the market is inactive for this instrument during part of the trading session, and transactions were made during the other part of the session? Apparently, the definition of an active market should include such criteria as price availability, the number of deals made per trading session, the volume of trades in an instrument per trading session, the regularity of trading in an instrument (liquidity of an instrument).

Approaches to determining the fair value of derivatives

Another obvious point that Regulation No. 372-P requires a credit institution to formalize, moreover, by fixing it in an accounting policy, is the determination of the fair value of a financial instrument. Regulation No. 372-P implicitly suggests using the fair value principle based on three approaches. First of all, the Bank of Russia says that the fair value of a financial instrument should be determined based on prices available in an active market for this instrument. Although fair value, generally speaking, does not have to be equal to the published price in an active market. This is the first approach. In the case when the market is inactive, the second approach is applied, namely: the fair value of derivatives is determined based on the information provided by brokers and other market entities on the prices of derivatives comparable to the estimated derivative (clause 2.2 of Regulation No. 372-P). Finally, the third approach is applied when it is impossible to follow the first two and the fair value is determined on the basis of “other valuation methods” (ibid.).

An internal document should fix the frequency of verification of the reliability of the methods used to determine the fair value, which should be carried out at least once a year.

Accounting for operations with derivative financial instruments

Accounting of derivatives, as well as any other facts of the financial and economic activities of a credit institution, follows the essence of the operations carried out. Accounting can be roughly divided into three stages: initial recognition, subsequent measurement and derecognition.

(By the way, the tax accounting of derivatives is somewhat difficult, we will consider it in a separate article.)

Fair value of derivatives: measurement, recognition, change

In accordance with clause 3.1 of Regulation No. 372-P, derivatives are recorded in accounting accounts at fair value in the currency of the Russian Federation, and in accordance with clause 1.4 of the same document, they are measured at fair value. Thus, both recognition and evaluation of them in the balance sheet are made at fair value, and in rubles.

The procedure for the initial recognition of derivatives is described in clause 3.2 of Regulation No. 372-P. Thus, it is separately mentioned that the fair value of derivatives at the time of initial recognition may be zero, in which case no accounting entries are required. It may seem strange to specialists of credit institutions who do not have experience in working with derivatives that the acquired asset can have a zero fair value. But there is nothing surprising in this. Consider, for example, a futures for the delivery of shares (as you know, a futures is a contract that represents the delivery of an asset at a certain price in the future).

Example

Suppose that the bank intends to purchase a contract for the supply of OAO Gazprom shares on December 15, 2011 at a price that will be formed on the spot market, that is, at a certain market price of the shares themselves on that date. The purchase of such a contract on some date, for example, in October 2011, at a price of 17,500 rubles. (1 futures is a contract for the supply of 100 shares) means a very specific market expectation regarding the share price on 12/15/2011, which, taking into account risk and the value of money, is 17,500 rubles, or 175.00 rubles, as of this interim October date. in terms of one share. However, such an expectation does not mean that the futures' fair value is RUB 17,500, since the value of the futures lies not in its market valuation, but in the variation margin that the contract holder will receive by changing its fair value. At the time of the conclusion of the transaction to buy the futures, it is quite possible that the price of the transaction coincided with its calculated value, that is, the variation margin is 0. In this case and at this particular point in time, the contract has no benefit to its holder and, therefore, its fair value is equal to 0. Although, of course, in relation to futures for the shares of Gazprom, one can hardly expect that the variation margin will be equal to 0.

If the fair value of derivatives is non-zero and there is no cash flow between the parties to the contract, then accounting entries are made:

— for a positive fair value:

Dt 52601 "Derivative financial instruments from which economic benefits are expected"

Kt 70613 "Income from derivative financial instruments", symbol 16101;

— for negative fair value:

Dt 70614 "Expenses on derivative financial instruments", symbol 25101

Kt 52602 “Derivative financial instruments for which economic benefits are expected to decrease”.

In the case when the fair value is different from zero and there is a cash flow between the parties under the contract (a typical example is a premium paid by the buyer of an option to its seller), accounting is carried out using accounts 47408/47407:

- Award requirements:

Dt 47408 "Settlements on conversion transactions, derivative financial instruments and futures transactions"

Kt 47407 "Settlements on conversion operations, derivative financial instruments and futures transactions";

- accounting for the premium:

Dt 47407 "Settlements on conversion transactions, derivative financial instruments and futures transactions"

Kt 52602 “Derivative financial instruments for which economic benefits are expected to decrease”;

- making payments in terms of the premium:

Dt cash (for example, 30102 or 30602)

Kt 47408 "Settlements on conversion operations, derivative financial instruments and futures transactions".

It may seem strange that the premium received is shown as a liability, or rather as an instrument, on which the economic benefits are expected to decrease, since the premium is cash actually received, not paid. However, this state of affairs is quite consistent with the economic essence of the transaction, because the premium is paid to the seller of the option in exchange for obtaining the right to sell him or buy from him a specific asset on a certain date (or within a certain period) at a certain price. In other words, the seller, having received the premium, bears a very specific obligation for settlements in the future, the assessment of which is this very premium.

Accounting for the option premium is accordingly mirrored, as a result of which an asset appears on the balance sheet on account Dt 52601 “Derivative financial instruments from which economic benefits are expected to be received”.

The change in the fair value of the option is accounted for in the same way as described above, without accounts 47408/47407.

Derecognition of derivatives

Derecognition of derivatives is reflected depending on whether the underlying asset is delivered or not.

In the case of deliverable instruments, derecognition is carried out using accounts 47408/47407. Regulation No. 372-P separately considers the derecognition of instruments for the supply of foreign currency, securities, precious metals and other non-commodity assets. However, the principle of reflecting derecognition is the same.

Derecognition actually represents the implementation of the purchase and sale transaction of the underlying asset. At the same time, the conditions for the implementation of such a transaction are determined in some way by the terms of the corresponding derivative, i.e. contract specification. However, at the time a derivative is derecognised, its fair value may not be equal to zero, i.e. represent, for example, for the holder of such an instrument having a positive fair value, economic benefits to be received. It is logical to assume that the requirements for the sale and purchase of the underlying asset on derecognition should also include the remaining fair value of the derivative.

Otherwise, accounting for the execution of a transaction resulting from the derecognition of derivatives does not present any difficulties, at least with regard to deliverable derivatives. For such financial instruments, it should be taken into account that the sale of individual financial assets, such as securities, is reflected through the disposal (sale) of property accounts. For the case of non-deliverable derivatives, accounting is somewhat more complicated due to the use of account 61601 “Auxiliary account for reflecting the disposal of derivatives and settlements on interim payments”, which is perceived, by the way, as the fifth wheel in a cart, since there is no particular visible need for it. The mode of its operation is simple and similar to the accounts of disposal (sale) of property: on one side, the requirement / obligations are written off, on the other - the receipt / write-off of funds, the balance of settlements is attributed to the financial result.

Accounting for deliverable derivatives

Financial accounting of derivatives, among other things, is also kept on the accounts of chapter D of the current Chart of Accounts. However, only deliverable derivatives are taken into account on these accounts.

It must be said that off-balance sheet accounting in the accounts of Chapter D may be accompanied by a balance sheet accounting for individual settlements on derivatives. Thus, for example, a forward contract that has not yet reached its due date may have interim payments from one party to the contract in favor of the other. In this case, the settlements will obviously be reflected in the balance sheet of the credit institution, despite the fact that the forward contract will still be recorded in the accounts of the head D. Thus, in short, in the accounts of the head D, the derivative financial instrument is shown on a gross basis in the full amount of all claims and liabilities, while only the change in the fair value of derivatives is shown on the balance sheet.

Accounting for swap transactions

A separate element in accounting is accounting for swap transactions. The definition of them can be found in the "Regulations on the types of derivative financial instruments", approved by the Order of the Federal Financial Markets Service of Russia dated 04.03.2010 No. 10-13 / pz-n. In practice, especially in small banks, two types of swap agreements are used: a currency swap agreement, which is the sale of foreign currency with an obligation to repurchase it (analogous to a repo with securities), and an interest rate swap agreement.

An interest rate swap is a transaction between two parties in which one party transfers to the other received interest payments accrued based on a fixed rate in exchange for a counter transfer from the other party also interest payments, but calculated at a variable rate. This tool is used to manage interest rate risk. However, accounting for a currency swap agreement is unlikely to cause difficulties, since such an agreement is easily divided into two transactions for the purchase and sale of foreign currency.

Regarding the accounting for interest rate swap agreements, Regulation No. 372-P contains Chapter 6. In its clause 6.1, the last paragraph just describes payments on interest rate swaps, which are called other intermediate payments in this clause. Accounting for other milestone payments is described in paragraph 6.5 of this document and is a fairly simple scheme: a change in fair value is reflected in correspondence with account 61601 “Support account for the disposal of derivative financial instruments and settlements on milestone payments”, on the other side of account 61601 the sum of monetary claims and liabilities is carried out, the difference is attributed to the financial result. The amount of monetary claims and liabilities is written off in correspondence with the accounts for accounting for cash and settlements. If the swap is non-deliverable and the parties list the difference between mutual claims, then such accounting does not raise any special questions. If the parties transfer flows of interest payments in full, without offset, then it is not entirely clear how to reflect these flows.

Accounting for collateral

Another point that makes sense to dwell on when considering the accounting for derivatives is the accounting for collateral. Collateral is the amount of funds on the account of a credit institution, which is blocked by a broker as collateral for settlement of obligations arising from derivatives. Regulation No. 372-P contains an indication only of settlements between the parties on derivatives, and nothing specific is said about the blocking of funds by the broker. There can be two approaches to accounting for collateral: to record it on a separate account as other placed funds, or not to record it anywhere. Accounting on a separate account gives greater visibility, but adds complexity to accounting operations.

Since in Appendix 11 to Regulation No. 302-P the number of accounts for recording transactions with financial instruments is inflated unreasonably, the use of an additional account for recording collateral seems redundant. Therefore, it is not necessary to keep records of funds blocked by a broker on a separate account. But it is necessary to take into account the following circumstance. The blocked funds, although they continue to belong to the credit institution, are nevertheless limited in use. This fact should be reflected in the calculation of mandatory ratios, in particular liquidity ratios.

Hedging

It's no secret that derivatives are used as risk hedging instruments. International Standards cover hedge accounting in a separate chapter of IAS 39 Financial Instruments: Recognition and Measurement. This standard defines concepts such as the hedged item and the hedging instrument. The essence of the mentioned chapter of the standard is that hedge accounting changes the standard requirements for the presentation of financial instruments in financial statements. For example, a bond held by a credit institution as a financial asset for sale (available-for-sale) is revalued to reflect changes in fair value as other comprehensive income, that is, in equity. However, if such a bond is designated as a hedged item, in other words, participates in a hedging relationship, then its revaluation is recognized in the statement of comprehensive income as income or expense received during the reporting period, along with a change in the fair value of the hedging instrument. This is logical because, in the case of a hedging relationship, the change in the fair value of the hedged item cannot be treated separately from the change in the fair value of the hedging instrument.

The Bank of Russia does not define hedging and other related concepts. However, hedging manifests itself, for example, when drawing up a report on an open currency position (form 0409634). Filling in this form is based on the requirements of the Instruction of the Bank of Russia dated July 15, 2005 No. 124-I “On establishing the size (limits) of open currency positions, the methodology for their calculation and the specifics of supervising their compliance credit institutions". Sections 1.7.2 and 1.7.3 are of interest to us in it. According to clause 1.7.2, the claims and (or) liabilities involved in the calculation of the net term position include claims and (or) liabilities on hedging transactions made in order to compensate for possible losses resulting from an adverse change in the value of the hedged item (underlying instrument ). Further in the text of this paragraph, it is indicated which transactions are included in the calculation of the urgent position, and which are not. For example, futures contracts bought or sold on RTS FORTS are considered as hedging transactions included in the calculation of the term position.

However, clause 1.7.3 is puzzling, which states the following verbatim: “Until the moment of calculating the purchase and sale price of financial instruments, carried out in accordance with the terms of the contract, claims and liabilities under transactions for the purchase and sale of financial instruments do not participate in the calculation of the net term position , settlements for which, in accordance with the agreements, will be carried out at the price calculated on the date specified in the agreement. The sentence clearly does not agree grammatically, which is unacceptable for normative act, as it raises doubts in its practical application. Apparently, the following situation is meant. On the same RTS FORTS market, futures contracts are traded, according to the specification of which the underlying asset will be delivered on the contract expiration date at a price that will be calculated in a certain way on that date (for example, the current euro/dollar quote will be taken according to the data of the European Central Bank) . Thus, during the circulation period of such a futures contract, the delivery price of a financial instrument, that is, a foreign currency, cannot be calculated, since the date of its calculation has not yet arrived. There are similar derivatives in other financial markets. Following this logic, such futures will not be included in the OFP calculation, but will be shown in the "Reference" section of form 0409634.

As a result, it is not entirely clear how one should still fill out form 0409634 in terms of derivatives, both in the case of hedging and without it. It would be logical to assume that in the case of hedging, derivatives and the items hedged by them are not included in the calculation of the OCP in the part in which they offset each other, thus showing the real currency risk. In the case when there is no hedging, it would be logical to just show the derivatives position in the calculation of the term position, since derivatives, although they do not require significant financial costs for their acquisition, carry a significant currency risk.

1 - Coastal A.Yu. Accounting for operations with derivative financial instruments // Taxation, accounting and reporting in commercial bank. 2011. No. 8. S. 36-48.

In the economic literature, among other classifications of securities, one can find the division of securities into two classes - basic and derivative securities. In the previous chapters, we have already met with the main, "classic" securities - stocks, bonds, bills, etc. Now we have to find out what derivative securities are.

As we have already found out, an investor who has the amount of funds sufficient to purchase a certain number of securities can buy these securities on the market with the aim of long-term holding them and receiving income in the form of interest or dividends, or with the aim of subsequently reselling these securities for more favorable rate. However, the future price of securities may change for the worse for the investor. In this case, a cash transaction - a transaction in which one of the parties provides securities, and the second - pays for them, may not be profitable for the investor. An alternative form of transaction is a futures transaction, in which one party undertakes to deliver securities in the future, and the other party to pay for them the price fixed in the agreement. Such a transaction allows the investor to insure, or, in exchange language, to hedge his risks associated with changes in prices for underlying securities, changes in exchange rates, interest rates, etc. The most common form of futures transactions are transactions with derivative financial instruments.

TO derivative financial instruments include: futures, option, swap. They are futures contracts based on financial assets - currency, interest rate, traditional securities. Some authors also include depositary certificates (receipts), subscription rights, warrants, convertible bonds to derivative financial instruments. They will be discussed below. Let's make a reservation right away that this is a special class of securities that do not have all the properties of derivatives. To designate these securities, we will use the term "secondary securities".

When characterizing derivative financial instruments, it is necessary to note their inherent properties:

• Derivatives are of a term nature.
• The prices of derivative instruments are based on the prices of the underlying assets.
• Derivative financial instruments have a limited period of existence - from several minutes to several years.
• Operations with derivative financial instruments allow you to make a profit with minimal investment.

The term nature of derivative instruments means that the performance of the obligations of counterparties will occur at a certain point in the future, after a certain period of time. Underlying assets are those assets (currency, shares, bonds, etc.) that must be accepted or delivered in the future in accordance with a forward contract. Futures is a futures exchange contract, one party of which undertakes to buy and the other - to sell a certain amount of the underlying asset at a specified date in the future at a fixed price. An option is a contract, the buyer of which acquires the right to buy or sell an asset at a fixed price within a certain period, and the seller undertakes, at the request of the counterparty for a cash premium, to ensure the exercise of this right. A swap is an agreement between two counterparties to exchange payments or other assets in the future in accordance with the conditions specified in the contract.

As an example of the emergence of a new product, we can mention the creation in 1927 by the Morgan Guarantee Bank in the USA of a fundamentally new instrument that allows foreign investors to purchase shares of foreign issuers on the domestic market - American Depositary Receipts (ADRs). Later, another type of these instruments appeared - global depositary certificates (GDR Global Depositary Receipts). The difference between the two is that while ADRs are placed on US markets, GDRs can be traded outside the United States.

In this way, depository certificates- these are publicly traded certificates that replace shares of foreign issuers held in trust by foreign branches of banks.

Another type of financial engineering products is strips- Separate Trading of Registered Interest & Principal of Securities. These financial instruments are formed as a result of stripping - the process of separating outstanding coupons from the face value of the bond. As a result of the stripping performed by the depositary, one coupon bond can be converted into two or more zero-coupon bonds, one of which will represent the bond itself, and the rest - coupons.

convertible security is a security with a free exchange option for a predetermined number of common shares of the same issuer. The conversion rate is the number of ordinary shares for which one convertible security can be exchanged.

Conversion rate represents the declared value of the ordinary share at which it will be granted to the investor at the time of the exchange.

conversion value is an indicator of the estimated value at which transactions of purchase and sale of a convertible security could be carried out if they were valued at the value of ordinary shares for which they are exchanged. The excess of the current rate of a convertible security over its conversion value is called a conversion premium. It is necessary to mention two more types of securities, which are also relatively young financial instruments, and the existence of which is impossible without the presence of underlying equity securities.

Subscription rights- These are securities that give the right to purchase, within a short period of time, a certain percentage of a new issue of ordinary shares of the same issuer at a predetermined rate.

Free subscription rights give each shareholder the opportunity to retain their share in the authorized capital of the company. The rate of the new share is indicated in the "right" and is called the exercise rate. The execution price is always set at a lower level than the current market price of the stock.

Warrant- This is a security that gives its holder the right to buy a share from a company at a rate indicated in the warrant itself.

Unlike subscription rights, a warrant is a long-term security with a maturity of up to 5, 10, sometimes 20 years. Some warrants have no maturity at all.

Warrant execution rate is the advertised rate at which the holder of a warrant can purchase the underlying share.

Since warrants have a relatively low cost, they are characterized by the volatility of rates and the ability to provide a high rate of return.

Investing in subscription rights and warrants allows you to use the so-called "leverage effect" - the possibility of acquiring a certain share in the company's equity capital at a relatively low capital cost.

As mentioned above, depositary receipts, subscription rights and warrants, convertible bonds, which we called “secondary securities”, can only be conditionally classified as derivative financial instruments, since their occurrence and use, as well as pricing is directly related to the circulation of underlying securities. . In this case, the initiator and issuer of these securities is usually the issuer of the underlying securities (in the case of "classic" derivative securities, the issuer is the clearing house of the exchange). In addition, if a derivative is issued for the purpose of hedging trading positions market participants, the issue of "secondary" securities allows either to encourage existing or future owners of the underlying securities (in the case of convertible bonds, subscription rights, warrants), or to bring the underlying securities to new financial markets (depositary certificates).

So, we have considered the concept of derivative financial instruments, learned what financial engineering is. Now let's take a closer look at the main types of derivative financial instruments.

Futures

futures contract represents a commitment to buy or sell a specified quantity of a commodity at an agreed price on a specified date in the future. Futures contracts are standardized exchange contracts.

Futures contracts were first used in the 40s of the XIX century at the largest commodity exchange - the Chicago Board of Trade. The underlying asset of the first futures contracts was grain.

The explosive growth of commodity futures contracts began in the 1950s and 1960s due to strong fluctuations in commodity prices and the beginning of international economic integration.

Rising interest rates and increased exchange rate volatility in the 1970s contributed to the development of a market for financial instruments that could be used to mitigate foreign exchange risk. In 1972, the first futures contract for currency appeared on the Chicago Mercantile Exchange, then for Treasury bills and interest rates, and in 1982 for stock indices.

Forward contracts served as the prototype for futures contracts.

forward contract is a contract between two counterparties on the future delivery of the underlying asset on agreed terms. Forward contracts are individual, they are not traded on exchanges.

While there are similarities between these two types of contracts, there are a number of significant differences.

Distinctive features of futures contracts are as follows:

A reflection of investors' expectations regarding the future price of the underlying asset is the futures price.

Futures price is the price that is fixed at the conclusion of the futures contract. When concluding a contract, the futures price may be higher or lower than the price of the underlying asset at the current moment (spot price). The situation in which the futures price is higher than the spot price is called contango. The situation in which the futures price is lower than the spot price is called backwardation.

Depending on the type of underlying asset, the following types of futures contracts are distinguished.

Futures commodity contract is a contract for the acceptance or delivery of goods of a certain quantity and quality at a price fixed in it on a specified date. Grain, oil, precious metals, foodstuffs, etc. can act as a basic commodity.

Futures financial contract is a contract, which is an agreement obliging to buy or sell a certain financial instrument within a certain period of time at a price fixed in it.

Depending on the type of the underlying asset that underlies the financial futures, there are three main types of futures:

1. Interest rate futures are futures contracts based on debt securities. In the US market, the most common interest rate futures are US Treasury bill futures, 30-day interest rates, 90-day Eurodollar CDs, medium and long-term US Treasury bonds.

The price of a futures, the basis of which is a short-term interest, is determined according to the rule: 100 - the interest rate fixed in the contract. The scale of contract price movement is a base point (tic) equal to 0.01%. Each basis point for each type of contract has the same absolute value:

C b.p. \u003d BP x (Sk / 12) x Hk,

where C b.p. - base point valuation
BP - base point (tick) = 0.0001
Sk - standard term of the contract (in months)

The price of the futures, the basis of which is the long-term interest rate, is determined according to the rule: 100 - the percentage value prevailing in the market for cash transactions. The scale of prices in this case is not 0.01%, but 1/32 of every 100 units of face value, and the calculation formula is as follows:

Cb.p. = 1/32 x 0.01 x Hk

2. Currency futures- these are futures contracts, the basis of which is a foreign currency. Currency futures are purchased based on the exchange rate. The price of a futures contract is expressed in dollars per unit of currency. The base point price is determined as follows:

C b.p. \u003d C3 x Hk,

where Cb.p. - the cost of a base point (tick) in US dollars per unit of national currency;
C3 - the standard value of the base point, set by the exchange in dollars per unit of currency;
Hk - standard face value of the contract

3. Stock index futures are futures contracts based on comprehensive stock market metrics like the Standard & Poor's 500 index. The most commonly used indices in the US as a basis for futures are the Standard & Poor's 500 Index, the New York Stock Exchange Composite Index, and the Value Line Composite Index.

The parties to a futures contract are not strictly speaking "buyers" and "sellers" because they each have a firm commitment to accept one asset (such as stocks) and deliver another asset (such as money). However, according to tradition, such terminology has developed in the futures market. The party that commits to deliver the underlying is said to have "sold the futures" or "short." The party that commits to accepting the underlying asset is said to have "bought the futures" or "long the position".

Option

An investor who is confident that his predictions about future prices for some asset will come true has the opportunity to enter into a futures contract. But this will make his position quite risky, because if his forecast is wrong, the investor will not be able to refuse to execute the transaction. An investor can limit his financial risk by using an option transaction.

The first mention of the use of options in England dates back to 1694. One of the first options appeared in the 17th century in Holland: these were options for tulips. Currently, in developed stock markets, option contracts are concluded for various commodities, currencies, securities (including derivatives), stock indices. The boom in options markets began after 1973. Currently, there are both exchange-traded options and options traded on the OTC market.

Depending on what rights the buyer of an option acquires, there are two types of options - an option to buy and an option to sell.

An option to buy - a call option (call) - an option that gives the option buyer the right to buy the asset specified in the contract at the specified time from the seller of the option at the strike price or refuse this purchase.

A put option - a put option - an option that gives the option buyer the right to sell the asset specified in the contract within a specified period of time to the option seller at the strike price or refuse to sell it.

Since the price of the underlying asset in the cash market constantly fluctuates, the ratio of the spot price to the strike price of an option can vary. In this regard, three categories of options are distinguished: an option with a win (option "in the money") an option that, if it is immediately exercised, will bring profit to the investor; no-win option (at-the-money option) an option that, if exercised immediately, will have neither a positive nor a negative impact on the financial condition of the investor; out-of-the-money option An option that, if exercised immediately, will result in financial losses for the investor.

Options are exercised if they are out-of-pocket options at the time of exercise.

Options allow investors to use different trading strategies. The simplest of these are the so-called synthetic strategies: a combination of buying / selling options with buying / selling underlying assets, such as shares. Such strategies allow investors to hedge their positions against high risk.

There are also more complex strategies that are formed by simultaneously selling and / or buying several options. These include combinations and spreads.

A combination is a portfolio of options of different types on the same asset with the same expiration date at the same or different strike prices. Here are some examples of combinations. A straddle is a combination of call and put options on the same underlying asset with the same strike price and contract expiration date. The buyer has the right to either buy or sell the underlying asset at a set price at some point in the future, but not both. This combination is used when significant changes in the price of the underlying asset are expected in the future, but it is impossible to determine exactly in which direction it will occur. The seller of the rack is counting on the fact that the exchange rate fluctuations will be small. The buyer pays the seller two premiums, the sum of which in pre-revolutionary Russia was called rack tension. A strangle is a combination of put and call options on the same underlying asset with the same contract expiration date but different strike prices. This combination is more likely to attract the option seller, as it opens up opportunities to profit from a wider range of stock price fluctuations. A strap is a combination of one put option and two call options with the same contract expiration dates, and the strike prices can be either the same or different. The buyer of options resorts to such a combination if he believes that an increase in the price of the underlying asset is most likely. A strip is a combination of one call option and two put options with the same contract expiration dates and the same or different contract strike prices. A strip is acquired when there is reason to believe that a fall in the underlying asset is most likely. A spread is a portfolio of options of the same type on the same asset, but with different strike prices and/or expiration dates, with one of them acting as a seller (writer), and for others as a buyer-holder option.

In addition to various trading strategies based on the use of options, there are also derivative financial instruments that include the features of options. These include such instruments as cap, fl and collar. Cap (cap - "cap") floating loan agreement interest rate, but with a guarantee that it will never exceed some certain level. The use of this tool allows the borrower to limit the risk on their obligation. Flo (floor - “floor”) is an agreement to provide a loan with a floating interest rate, but with the condition that it will never fall below a certain level. In this case, the lender limits its risk from falling interest rates. Collar (collar - “collar”) is a combination of two percentage options - cap and float. This combination protects the investor from large fluctuations in interest rates, as it establishes an upper and lower limit for interest rate changes.

Swap

Swap- this is an agreement between two parties to exchange payments in the future in accordance with the conditions specified in the contract. The cash flows are generally linked to the value of the debt instrument or to the value of the foreign currency.

Thus, the main types of swaps are interest and currency swaps.

The swap market was born in the late 1970s, when currency traders discovered and used currency swaps as a means to circumvent the British government's foreign exchange regulation. The prototype of swaps was the so-called parallel or back-to-back loans, which were popular in the late 1960s and early 70s as a means of foreign financial investment under foreign exchange restrictions. The first interest rate swap took place in 1981 in an agreement between IBM and the World Bank.

There are at least two reasons for the popularity of swaps among investors. First, swaps allow investors to mitigate the interest and currency risks that arise in the process of concluding commercial transactions. Second, some firms may have certain advantages in obtaining certain types of financing.

Currency swap represents the exchange of a nominal value and a fixed percentage in one currency for a nominal value and a fixed percentage in another currency. A currency swap involves three different types of cash flows:

1. at the initial stage, the parties exchange cash;
2. the parties make periodic interest payments to each other throughout the term of the swap agreement;
3. at the end of the swap, the parties again exchange the principal amount.

Interest rate swap is an agreement between the parties on mutual periodic payments determined on the basis of agreed interest rates and a mutually agreed contract amount. Typically, an interest rate swap consists of exchanging fixed rate debt for floating rate debt. At the same time, the parties exchange only interest payments, and not face values. The term of the agreement usually ranges from 2 to 15 years.

The most commonly used floating rate in swaps is LIBOR (LIBOR - London Interbank Offered Rate).

For example, company A and company B enter into the following agreement. The principal amount of the swap is $1 million. The term of the agreement is 2 years. company undertakes to pay interest payments 2 times a year at a fixed rate of 5% per annum, and company B - payments at a floating rate, for example, at the rate of LIBOR. The final financial result of the operation will be known only after its completion.

In addition to interest and currency swaps, there are other types of swaps: An asset swap consists in the exchange of assets in order to create a synthetic asset that would bring a higher income. A commodity swap consists in the exchange of fixed payments for floating payments, the value of which is tied to the price of a commodity (for example, gold, oil, etc.). A swap option is a financial instrument derived from a swap that has some of the features of an option. The buyer of a swap option acquires the right to enter into the swap at a certain moment (or through time periods) and on firmly fixed terms.

Early swap trades in the form general rule were concluded on the individual terms of the parties - direct participants, and there were no intermediaries in the form of banks accepting credit risk in these agreements. Gradually, standardization began to increase in terms and conditions of transactions, and competition in this market also intensified. Three-way swaps have appeared, in which an intermediary bank participates, through which payments are made. Such an intermediary assumes the credit risk.

Brief conclusions

1. Derivative financial instruments are instruments that have two basic characteristics - urgency and productivity. Urgency means that the performance of the obligation will occur at some point in the future. Derivative means that a derivative instrument is based on some underlying asset (currency, stocks, bonds, etc.) and the price of the derivative instrument is formed based on the price of the underlying asset.

2. The market of derivative financial instruments is the most dynamically developing segment of the financial market

3. The main derivative financial instruments are futures and forwards, options, swaps, as well as certificates of deposit and convertible bonds

4. Depending on the goals of the investor, derivative financial instruments make it possible to insure risks and receive increased profits with relatively small financial investments.

Today, investors have a lot of opportunities to earn both on changes in the price of shares and currencies, and on special financial instruments - derivatives.

The modern financial system includes a wide range of opportunities for the sale and acquisition of various assets. And just derivatives are one of the most popular and liquid instruments among professional investors, but beginners do not understand this concept well. Therefore, novice investors have a problem using an unexplored tool, or they generally miss the opportunity to use it, due to ignorance. This article explains the concept of "derivative" on the fingers, describes its capabilities and talks about the types of these instruments.

Derivatives (from the English derivative) are called derivative financial instruments or agreements (contracts) through which two parties can enter into a transaction for the right or obligation to use some underlying asset (for example, a block of shares). Those. under this agreement, one party undertakes to sell, buy, exchange or provide for use some commodity or package of securities.

When concluding an agreement in relation to any asset (it is called the base), the conditions for its use are determined and negotiated, which are prescribed in the agreement.

The wording is quite difficult to understand, but everything is much simpler. A simple example of a derivative is the purchase of equipment on order. In the contract with the seller, the buyer indicates the name, brand, characteristics and the exact price and delivery time. The seller must fulfill the contract on time and deliver the specified goods to the place of receipt. In this case, the underlying asset in the contract (derivative) is equipment (for example, a computer).

With the help of this agreement, you can protect yourself from price changes, because. the seller is obliged to fulfill the contract at the price of the goods strictly stipulated in it. It can also be beneficial for the seller. For example, a certain rare computer equipment will be purchased under this agreement and will not remain in the warehouse.

From a legal point of view, this agreement allows the parties to accept obligations to fulfill the conditions and gives them certain rights, which is more convenient, unlike a regular purchase / sale. Most often, investors use derivatives to limit risks (hedging) and the opportunity to profit from changes in the price of the underlying asset. Thus, the purpose of physically obtaining the asset is secondary. But, as in any kind of speculative activity, the result of a financial transaction can be both profitable and unprofitable.

Derivatives market

The derivative, as a financial instrument, was formed in the 70s of the last century with the formation of the modern monetary system. Prior to this, a financial instrument was used in relation to goods, then its use switched to currency, stocks, bonds, and so on. Agreements were even concluded on debt securities of companies and some states.

In the Russian Federation, the formation of the derivatives market took place in the 1990s.

Types of financial instrument

In economics, derivatives are usually classified according to two criteria. First indication: what type of asset is being used:

• Goods (precious metals, raw materials, grain).
• Bonds, shares, bills and other securities.
• Currency.
• Interest rates, indices.

The second sign: by type of transaction:

• Futures deal.
• forward transaction.
• Option deal.
• Swaps.

futures deal- an agreement that must be executed at the agreed time and at the current price under the terms of the contract.

forward transaction– an agreement that must be executed at a specified time and at an agreed price (the price at the time of the conclusion of the contract). Unlike futures, the transaction price remains fixed.

An option provides the right to an asset (the ability to sell or buy), but does not oblige the holder to do so. For example, the holder of a block of shares in a company wants to sell it and finds a buyer, then the latter can conclude an option-type contract with the holder. After that, the buyer transfers a certain amount of money to the seller, and he transfers the shares. However, the option is limited in time and if the buyer does not meet the deadline and does not buy the shares, then the pledge remains with the buyer and he can find another buyer and sell him a block of shares.

Swap- a speculative instrument, which is a double transaction of buying and selling the underlying asset, but under different conditions. The main purpose of swaps is to make speculative profits.

What are derivatives used for?

In the modern financial market, investors use this financial instrument for two purposes:

• Hedging is risk insurance.
• Speculative earnings.

Moreover, the goal of speculative earnings is much more common than risk insurance. Just above, forwards and futures were described. Forwards use just the same for insurance, because. the price of the underlying asset under the contract remains unchanged. But futures contracts are used to obtain benefits and insurance against financial losses.

With the help of a futures contract, an investor can protect himself in the event of a decrease in the value of an asset. In this case, he can sell futures and get real money, covering losses from a regular buy/sell transaction.

Many enterprises use futures for the supply of materials and raw materials for production. By concluding a contract for the purchase / sale of raw materials on a specific date, they can secure production and uninterruptedly receive goods, when concluding several futures contracts for different dates.

In the stock market, options are often used to hedge risks. For example, trader "A" analyzed the company's stock chart and realized that the cost of $10 per share is not the limit and the stock is undervalued. In a normal situation, trader "A" could simply buy a certain amount of shares and wait for the price to rise, then sell and take profits. But trader "A" decides to insure his investment and is looking for trader "B" - the holder of shares in this company. He offers him a deal on the following terms:

• "You hold shares for 3 months for me."
• "I deposit you a deposit of 20% of the value of the desired package (for example, 1000 shares of $10 will cost $10,000, trader "A" makes an advance payment of $2000)".
• "After 3 months you deliver me the shares and I pay the full price."

In the case of an option, as discussed above, trader A can choose not to buy the stock if it becomes unprofitable for him to buy. At the same time, Trader B does not return the advance payment to him. Trader "B" is in a winning position - he receives an advance payment, which in any case will remain with him, and if trader "A" refuses to deal, he will sell the block of shares to another trader. What are the possible paths?

• If the prediction is correct and the stock price has risen to $150, Trader A pays the remaining $80 per share (he paid $20 upfront) to Trader B any time before the contract expires and is left with a profit of $50.
• If the forecast was wrong and the price per share fell to $50, it is better for trader A to refuse to buy and lose $20 than to lose $50 by buying a block of shares at the agreed price of $100 per unit.

In any case, the decision on the transaction is made by the buyer - he can either buy or refuse to purchase. The seller only has the obligation to deliver the goods to the buyer and, if the latter refuses, the seller can find another buyer.

Based on the possible paths of events in the above example, trader A insures increased losses with the help of derivatives and, in case of an incorrect forecast, loses only the advance payment.

Conclusion

Novice investors and financial market players should clearly understand what a derivative is and how to work with it. A derivative contract has the following properties:

• The decision to close the transaction is made by the buyer.
• The seller is obliged to deliver the goods in case of consent to the purchase.
• The buyer has the right to close the transaction only at the agreed time. In case of delay, the seller has the right to find another buyer.

With the help of derivatives, investors pursue the following goals:

• Risk insurance.
• profit on speculation.

The simple essence of derivatives is the combination of risk insurance with the possibility of profit. Those. You can buy a product that cost $100 a month ago and pay $40 today. Or lose only the $10 down payment, rather than lose the cost of the price drop if you purchased the item in a regular deal.

Derivatives include financial instruments that provide for the possibility of buying/selling rights for the acquisition/supply of the underlying asset or the receipt/payment of income associated with a change in some characteristic of this asset. Thus, unlike the primary financial instrument, a derivative does not imply a predetermined operation directly with the underlying asset - this operation is only possible, and it will take place only under certain circumstances. With the help of derivatives, not the actual assets are sold, but the rights to deal with them or receive the corresponding income.

A derivative financial instrument has two main features of "derivativeness". Firstly, such an instrument is always based on a certain underlying asset - a commodity, share, bond, promissory note, currency, stock index, etc. Secondly, its price is most often determined based on the price of the underlying asset. Since the underlying asset is some market product or market characteristic, the price of a derivative financial instrument is constantly changing. It is the latter that predetermines the fact that these instruments can act as independent objects of market relations, that is, serve as objects of purchase and sale. In other words, any derivative always carries several potential opportunities that predetermine its attractiveness from the standpoint of both the issuer and any market participants.

Many financial instruments and transactions are based on securities. security paper- this is a document certifying, in compliance with the established form and mandatory details, property rights, the exercise or transfer of which is possible only upon its presentation. Securities circulating in Russia that directly affect the activities of the vast majority of commercial organizations include: a government bond, a bond, a bill of exchange, a check, a deposit and savings certificate, a bill of lading, a share, privatization securities and other documents that are regulated by securities laws or according to the procedure established by them, they are referred to the number of securities 1 .

As noted above, the emergence of modern financial instruments (derivatives) was mainly due to hedging and speculative aspirations of market participants. Recall that speculation represents an investment of funds and high-risk financial assets, when the risk of loss is high, but at the same time, there is a probability that the investor will receive excess returns. As a rule, transactions of a speculative nature are short-term, and the risk of a possible loss is minimized through hedging. As you know, there are practically no risk-free operations in business; this statement is all the more true in relation to speculative transactions, the outcomes of which are not rigidly predetermined. Therefore, the need naturally arose to develop options and ways of behaving in the markets that somehow take into account risk. In principle, any financial management scheme that eliminates or minimizes the degree of risk can be called hedging 2 . In a stricter sense, under hedging understand the transaction of purchase and sale of special financial instruments, with the help of which they fully or partially compensate for losses from changes in the value of the hedged object (asset, liability, transaction) or the cash flow personified with it. With the development of financial instruments, it turned out that they can be successfully used not only in derivatives markets, but also in capital markets, as well as in current activities.

Forward and futures contracts are agreements for the sale and purchase of a commodity or financial instrument for delivery and settlement in the future. The contract is usually standardized in terms of quantity and quality of goods and implies the following actions: (a) the seller is obliged to deliver at a certain place and time a certain amount of goods or financial instruments; (b) upon delivery of the goods, the buyer is obliged to pay the predetermined (at the time of conclusion of the contract) price. Thus, with the help of such contracts, by fixing prices, price risks in a particular transaction are hedged. Some types of contracts, being securities, can be repeatedly resold on the exchange up to a certain period until their execution. There are also contracts under which obligations can be fulfilled not by the direct delivery or acceptance of goods or financial instruments, but by receiving or paying the difference in the prices of the futures and cash markets. In other words, the owner of a forward or futures contract has the right to: (a) buy or sell the underlying asset in accordance with the terms specified in the contract and (or) (b) receive income due to changes in the prices of the underlying asset.

So, the subject of bargaining in such contracts is the price, and the terms “sale” or “purchase” of the contract are conditional and mean only the seller’s position (the so-called short position, which implies the obligation to sell, deliver the goods) or the buyer’s position (the so-called “long position”). position, implying an obligation to buy goods). Before the due date of the contract, any of its participants can conclude a deal with the adoption of opposite obligations, i.e., buy (sell) the same number of the same contracts for the same period. The assumption of two opposing contracts cancels them mutually, thereby releasing the given participant from their execution.

In a sense, futures are a development of the idea of ​​forward contracts. Depending on the type of underlying asset, futures are divided into financial (basic asset - interest rate, currency, bond, stock, stock index) and commodity (basic asset - wheat, gold, oil, etc.). Compared to forward contracts, futures have a number of distinguishing features.

1. Forward and futures contracts by their nature are firm transactions, i.e. each of them is obligatory for execution. However, the goals pursued by the parties when concluding a contract of one type or another can vary significantly. A forward contract is most often concluded for the purpose of real sale or purchase of the underlying asset and insures both the supplier and the buyer against possible price changes. Although the assessments of the parties regarding price dynamics are subjective and may be different, they are united primarily by the desire to have a predictable situation. The forward is more characteristic of the nature of hedging, the futures - a shade of speculativeness, since it is often not the sale or purchase of the underlying asset that is important, but the gain from price changes.

Forward contracts are specified, futures contracts are standardized. In other words, any forward contract is drawn up in accordance with the specific needs of specific clients. Therefore, forward contracts are mainly objects of over-the-counter trading, while futures contracts are traded on futures exchanges.

There are no firm guarantees of the mandatory performance of a forward contract. If the price change is significant, the supplier of the goods may refuse to supply even under the threat of paying heavy penalties. Thus, such contracts are largely based on the trusting relationship of counterparties to each other, their professional honesty and solvency.

A forward contract is “pegged” to an exact date, while a futures contract is “pegged” to the expiration month. This means that the delivery of a commodity or financial instrument can be made by the supplier at his discretion on any day of the month specified in the contract.

Since there are usually many futures contracts, as well as participants in transactions, specific sellers and buyers, as a rule, are not tied to each other. This means that when a supplier is ready to execute the contract and informs the clearing (exchange) chamber of the exchange that organizes the execution of futures, the latter randomly selects a buyer from all buyers awaiting the execution of the contract and notifies him of the upcoming days of delivery of the goods.

6. Unlike forward contracts, which are usually sold on the OTC market, futures are freely traded on futures exchanges, i.e. there is a constant liquid market for these securities. Therefore, if necessary, the seller can always adjust his own obligations to deliver goods or financial instruments by buying back his futures. The functioning of the futures market and its financial reliability are ensured by the clearing system, within the framework of which the registration of trading participants is carried out, control of the status of participants' accounts and the deposit of guarantee funds by them, calculation of the amount of winnings and losses from participation in trading. All transactions are executed through the clearing (settlement) house, which becomes the third party to the transaction. Thus, the seller and the buyer are released from obligations directly to each other, and for each of them obligations arise before the clearing house. The Chamber performs the role of a guarantor for those who have not liquidated their obligations by the time they are fulfilled. Thus, the legal basis for operations with contracts are contracts that link market participants with the clearing house and the exchange; their financial basis is cash or cash equivalents contributed by participants in the form of collateral.

7. The main distinguishing feature of futures is that the change in prices for goods and financial instruments specified in the contracts is carried out daily throughout the entire period until they are executed. This means that cash flows are constantly circulating between sellers, buyers and the clearing house. The main reason for organizing such constant reciprocal payments is to prevent, to some extent, the temptation of one of the counterparties to break the contract for some reason, such as a sharp change in prices. Futures trading is quite a risky business, so most often it involves partners who have been working with each other for many years and trust each other to a certain extent. Futures contracts are most widely used in trading in agricultural products, metals, oil products and financial instruments.

Options are one of the most common financial instruments of a market economy. In a sense, options are a development of the idea of ​​futures. But unlike ^ futures and forward contracts, the option does not provide for the mandatory sale or purchase of the underlying asset, which, under unfavorable conditions (erroneous forecasts, changes in the general market situation, etc.), can lead to significant direct or indirect losses for one of the parties. Recall that in operations with futures, even if the delivery (purchase) of the underlying asset is not expected, a change in its price is reflected daily in cash flows, linking buyers and sellers, so the losses (income) from transactions with such instruments, in principle, can be significantly high. A fundamentally different situation occurs in operations with options, which make it possible to limit the amount of possible losses.

In the most general sense, an option (the right to choose) is a contract concluded between two parties, one of which writes and sells an option, and the second acquires it and thereby receives the right during the option specified in the terms; term:

a) fulfill the contract, i.e., either buy at a fixed price a certain number of underlying assets from the person who issued the option, the option to buy, or sell them to him, the option to sell;

b) refuse to perform the contract;

c) sell the contract to another person before its expiration date.

The person who acquires the rights arising from the option is called the buyer of the option or its holder, and the person who assumes the corresponding obligations is called the seller (issuer, writer) of the option. An option that gives the right to buy is called a call option, or a buyer's option (call option); An option that gives the right to sell is called a put option, or a put option. The amount paid by the buyer of the option to the seller, that is, the person who wrote the option, is called the option price (option price); this amount is non-refundable regardless of whether the buyer uses the acquired right or not. The price of the underlying asset specified in the option contract, at which its owner can sell (buy) the asset, is called the exercise price (exercise, or striking, price). The asset underlying the option is called the underlying asset. Any commodities or financial instruments can act as underlying assets. In most cases, options are standardized in their characteristics; for example, most often underlying assets are sold in lots - for example, shares can usually be bought in the form of a lot (package) in the amount of 100 pieces.

We emphasize that a feature of the option is the fact that as a result of the operation, the buyer acquires “not the actual financial instruments (stocks, bonds) or goods, but only the right to purchase (sell) them.

There are various classifications of options. In particular, depending on the intention to execute the delivery of the underlying asset, options are divided into two types - with physical delivery and with cash settlements. In the first case, the option holder has the right to physically receive the underlying asset (in the case of a call option) or sell it (in the case of a put option); in the second case, it is only about receiving payment in the form of the difference between the current price of the underlying asset and the strike price. In the case of a call option, its holder will exercise his right to receive the difference if the current price of the underlying asset exceeds the strike price; in the case of a put option, the reverse is true when the current price is less than the strike price.

Depending on the type of underlying asset, there are several types of options: on corporate securities, on stock indices, on government debt, on foreign currency, on commodities, on futures contracts.

In terms of expiration dates, it is customary to distinguish between two types of options: (a) European, when the contract gives the right to buy or sell underlying assets at a fixed price only on a certain day (expiration date), and (b) American, which gives the right to buy or sell on any day until the date specified in the contract (it is these options that dominate in world practice).

In the event that the person writing the option owns the number of underlying assets specified in it, the option is called covered (covered), if there is no such security for the option, it is called uncovered (uncovered). Writing an uncovered option is more risky; You can avoid risk by simultaneously selling and buying call and put options.

It must be emphasized that option contracts are obviously speculative and are not directly related to the activities of a particular company to increase its sources of financing. Income from operations with similar instruments is received by brokerage companies dealing in securities. The general strategy of the behavior of buyers and sellers in such operations is obvious - each of them seeks to benefit from a possible change in the market value of shares; whoever has a more accurate forecast, he gets the benefit. Wherein:

call option holders and put option issuers are bullish (in other words, they believe that the market price of the asset will increase in the future);

put option holders and call option issuers proceed from a forecast of a possible price decrease.

In addition to call and put options of a short-term, speculative nature, some special types of option contracts are also known in world practice, in particular, the right to preferential purchase of company shares and a warrant. It is these options that have a certain significance in making some decisions of a long-term investment nature.

The right to preferential purchase of the company's shares (share option) is a specific financial instrument, the need to introduce which was initially caused by the natural desire of shareholders to avoid a possible loss of control and a decrease in the share of income due to the emergence of new shareholders in the event of an additional issue. This security indicates the number of shares (or part of a share) that can be purchased for it at a fixed price - the subscription price. Such an operation is of particular importance, in particular, when transforming a closed joint-stock company into an open one. The possibility of vesting existing shareholders with a pre-emptive right to purchase voting shares and securities convertible into voting shares, if they are placed by public subscription, is provided for by Federal Law No. 208-FZ of December 26, 1995 “On Joint Stock Companies”. The rights to preferential purchase of shares as securities circulate on the market independently. When they are issued, the company sets a registration date - all shareholders registered on this date receive a “right to purchase” document, which they can execute at their discretion, i.e. buy additional shares, sell or simply ignore them. Right-to-buy financial instruments circulate on the market independently, and their market price may differ significantly from the theoretical value. This is primarily due to the expectations of investors regarding the shares of this company. If the stock is expected to rise in price, the market price of the right to buy also rises. The value of this financial instrument for the issuer is that the company activates the purchase of its shares. As for potential investors, they can receive a certain income if the price of the shares of this company rises.

Warrant literally means guaranteeing some event, such as the sale or purchase of a product. In financial management, a warrant is a security that gives the right to buy or sell a fixed amount of financial instruments within a specified period. Purchasing a warrant is a manifestation of caution if the investor is not completely sure of the quality of the securities and does not want to risk money.

There are different types of warrants. In the most typical case, the holder of the warrant acquires the ability to buy a specified number of shares at a specified price within a specified time. There are perpetual warrants that make it possible to buy a certain financial instrument at any time. The warrant does not give the right to interest or dividends and does not have the right to vote, date and value of redemption. A warrant can be issued simultaneously with financial instruments, the attractiveness of which is thereby to be increased, or separately from them. In any case, after some time, it begins to circulate as an independent security. As a rule, warrants are issued relatively rarely and only by large firms. Unlike purchase rights, which are issued for a relatively short period of several months, warrants can last for years. In addition, the fixed price, or strike price, indicated in the right to buy, which is set at the time of issuance of this financial instrument, is usually lower than the current market price of the share, while the exercise price in the warrant is usually 10-20% higher than the market price.

Usually warrants are issued together with the company's bond issue. This achieves: (a) the attractiveness of the bonded loan, and hence the success of its placement; (b) the ability to increase the share capital in the event that warrants are exercised. After the warrant is separated from the financial instrument with which it was issued (in the example discussed above, it was a bonded loan), it begins to circulate on the securities market on its own. In this case, possible operations with it can bring both income and loss.

Swap (exchange) is an agreement between two entities for the exchange of liabilities or assets in order to improve their structure, reduce risks and service costs. There are different types of swaps; the most common of these are interest rate and currency swaps.

The essence of the operation can be easily understood by the example of interest rate swaps. The company, attracting borrowed funds, is forced to pay interest on them. Lending can be carried out according to various schemes. So, loans can be issued either at a fixed rate or at a floating rate, for example, LIBOR 1 ;| or a rate “pegged” to LIBOR. In addition, the terms of loan agreements may be different, in particular, due to the different solvency of customers. Under these conditions, it turns out that it is possible to combine the efforts of two clients to service the loans received in order to reduce the costs of each of them.

The swap market began to develop in the early 1980s. This time was preceded by a period of use of parallel loans, when the two parties agreed on the exchange of principal and interest payments on them. In order to simplify the settlement mechanism between the parties, an operation called interest rate swap. Its essence lies in the fact that the parties transfer to each other only the difference in interest rates from the agreed amount, called the principal. This amount does not change hands, but only serves as the basis for calculating interest. Most often, interest is accrued and paid once every six months, but there may be other options. Interest rates for calculation can also be determined in various ways.

Currency swap is an agreement on the exchange of face value and a fixed interest in one currency for a face value and a fixed interest in another currency, while the actual exchange of face values ​​may not occur. Such operations are of particular importance when the company is developing new foreign markets and is constrained in the possibility of obtaining loans abroad due to its little known. In this case, she tries to find a foreign partner, possibly with similar problems, with whom she concludes a currency swap agreement.

REPO transactions represent an agreement on borrowing securities against a guarantee of funds or borrowing funds against securities; sometimes it is also called a securities repurchase agreement. This agreement provides for two opposite obligations for its participants - the obligation to sell and the obligation to purchase. A direct REPO transaction involves one of the parties selling another package of securities with an obligation to buy it back at a predetermined price. The repurchase is carried out at a price higher than the original price. The difference between prices, reflecting the profitability of the operation, as a rule, is expressed as a percentage per annum and is called the REPO rate. The purpose of a direct REPO operation is to attract the necessary financial resources. The reverse REPO transaction involves the purchase of a package with the obligation to sell it back; the purpose of such an operation is to allocate temporarily free financial resources.

The economic meaning of the operation is obvious: one party receives the money resources it urgently needs, the second one makes up for a temporary shortage in securities, and also receives interest on the provided money resources. REPO transactions are carried out mainly with government securities and are classified as short-term transactions - from several days to several months; in world practice, 24-hour contracts are most widely used. Recently, tripartite REPOs have been very popular, when there is an intermediary (usually a large bank) between the seller (borrower) and the buyer (creditor) of a package of securities, whose obligations are described in the contract. In this case, the parties to the agreement open their securities accounts and money in an intermediary bank; a tripartite agreement is seen as less risky than a conventional one. In a certain sense, a repurchase agreement can be viewed as a secured loan.

Summing up a brief description of the main financial instruments, we can conclude the following. With the help of financial instruments, four main goals are achieved: (a) hedging, (b) speculation, (c) mobilization of sources of financing, (d) facilitation of current routine operations. In the first three situations, derivative financial instruments dominate, in the fourth - primary instruments.

As already noted, the concept of "investment" can be interpreted quite broadly. If the concept of investments is narrowed down to long-term investments, which is quite traditional in science and practice, then only certain financial instruments (issuing a bonded loan, obtaining a long-term loan, issuing warrants, etc.) are significant for characterizing the nature, possibilities and methods of implementing the investment process .

However, another line of reasoning is also possible. If the concept of "investment" is interpreted in a broad sense - as estimated in the valuation of expenses made in anticipation of future income, then almost any financial instruments can be considered as tools for implementing the investment process. Note that such an interpretation is not unusual, but, on the contrary, seems to be quite justified. Indeed, suppose that we are talking about the expediency of accepting some investment project. Obviously, any such project involves not only investments in the material and technical base, i.e., in long-term assets, but also the formation of working capital, the effective use of which is one of the important factors in ensuring the acceptability and effectiveness of the original project as a whole. In turn, in a developed market economy, the efficiency of the use of working capital is to a large extent based on constantly prolonged short-term transactions performed using traditional and new financial instruments. In other words, there is a predetermined symbiosis of long-term and short-term financial decisions. In this case, almost any of the financial instruments discussed above can be interpreted as instruments for implementing the investment process.

Finally, we note that on the basis of financial assets and instruments, new operations are constantly being developed, which in one sense or another contribute to the activation of the investment process as a whole. In particular, we can mention collateral and mortgage operations, asset securitization operations, etc.