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Template:Equity swaps on futures: Difference between revisions
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A trick for young players. For all this talk of {{eqderivprov|Futures Price Valuation}}, section {{eqderivprov|8.6}} is all about {{eqderivprov|Index Transaction}}s and {{eqderivprov|Index Basket Transaction}}s, where (since you can’t by an {{eqderivprov|Index}} directly, it not being a corporeal thing, but merely an interesting<ref>Look, just go with me on this one, would you?</ref> disembodied intellectual concept), so the cleanest way of getting actual exposure to an index is to buy [[futures]] on the {{eqderivprov|Index}}. It's that, or buying the actual shares underlying the index — which is quite the operational pain in the posterior, if there are a hundred shares: all that balancing whenever the index constituents change. Gah. You get the idea. | A trick for young players. For all this talk of {{eqderivprov|Futures Price Valuation}}, section {{eqderivprov|8.6}} is all about {{eqderivprov|Index Transaction}}s and {{eqderivprov|Index Basket Transaction}}s, where (since you can’t by an {{eqderivprov|Index}} directly, it not being a corporeal thing, but merely an interesting<ref>Look, just go with me on this one, would you?</ref> disembodied intellectual concept), so the cleanest way of getting actual exposure to an index is to buy [[futures]] on the {{eqderivprov|Index}}. It's that, or buying the actual shares underlying the index — which is quite the operational pain in the posterior, if there are a hundred shares: all that balancing whenever the index constituents change. Gah. You get the idea. | ||
Now, what say you want to write an {{eqderivprov|Equity Swap}} on a ''share'' [[future]] directly? | Now, what say you want to write an {{eqderivprov|Equity Swap Transaction}} on a ''share'' [[future]] directly? | ||
Question one you’ll have (I know, because I had it) is ''why would you write an [[OTC derivative]] on an [[exchange-traded derivative]] of an [[exchange-traded security]]''? At least with an {{eqderivprov|Index}}, if you want to hedge unmessily, the only option is a future. Hence all this {{eqderivprov|Futures Price Valuation}} malarkey. | Question one you’ll have (I know, because I had it) is ''why would you write an [[OTC derivative]] on an [[exchange-traded derivative]] of an [[exchange-traded security]]''? At least with an {{eqderivprov|Index}}, if you want to hedge unmessily, the only option is a [[future]]. Hence all this {{eqderivprov|Futures Price Valuation}} malarkey. | ||
But if it is just a single share, why not just reference that single {{eqderivprov|Share}} and make it a standard {{eqderivprov|Share Transaction}}? | But if it is just a single share, why not just reference that single {{eqderivprov|Share}} and make it a standard {{eqderivprov|Share Transaction}}? | ||