LEARNING OUTCOMES

The candidate should be able to:

1. define a derivative and distinguish between exchange-traded and over-the-counter derivatives;

2. contrast forward commitments with contingent claims;

3. define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;

4. describe purposes of, and controversies related to, derivative markets;

5. explain arbitrage and the role it plays in determining prices and promoting market efficiency.