Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
| Call Option | The right to buy an asset at a fixed price during a particular time period.
(See Refer to page 819, 829)
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| Cross-Hedging | Hedging an asset with contracts written on a closely related, but not identical, asset.
(See Refer to page 815)
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| Derivative Securities | Securities whose returns depend on the price of an underlying asset and that allow market participants to offset the exposure of their cash market positions.
(See Refer to page 22, 801)
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| Economic Exposure | Long-term financial risk arising from permanent changes in prices or other economic fundamentals.
(See Refer to page 809)
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| Forward Contract | A legally binding agreement between two parties calling for the sale of an asset or product in the future at a price agreed upon today.
(See Refer to page 810)
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| Futures Contracts | An agreement drawn up for a fixed settlement date and price to deliver or receive an asset at a future date.
(See Refer to page 813)
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| Hedging | A protective manoeuvre; a transaction intended to reduce the risk of loss from price fluctuations.
(See Refer to page 800)
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| Option Contract | An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.
(See Refer to page 819)
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| Payoff Profile | A plot showing the gains and losses that will occur on a contract as the result of unexpected price changes.
(See Refer to page 810)
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| Put Option | The right to sell an asset at a fixed price during a particular period of time. The opposite of a call option.
(See Refer to page 819, 829)
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| Risk Profile | A plot showing how the value of the firm is affected by changes in prices or rates.
(See Refer to page 806)
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| Swap Contract | An agreement by two parties to exchange, or swap, specified cash flows at specified intervals in the future.
(See Refer to page 816)
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| Transactions Exposure | Short-run financial risk arising from the need to buy or sell at uncertain prices or rates in the near future.
(See Refer to page 808)
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2002 McGraw-Hill Higher Education