#derivatives
There are two general classes of derivatives. Some provide the ability to lock in a price at which one might buy or sell the underlying. Because they force the two parties to transact in the future at a previously agreed-on price, these instruments are called
forward commitments. The various types of forward commitments are called forward contracts, futures contracts, and swaps. Another class of derivatives provides
the right but not the obligation to buy or sell the underlying at a pre-determined price. Because the choice of buying or selling versus doing nothing depends on a particular random outcome, these derivatives are called
contingent claims. The primary contingent claim is called an
option.
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