What are derivatives, capital market, money market?. What is the formula for NAV?. What are forward, futures and options?.

Question

Accepted Answer

Derivatives are financial instruments whose value is derived from an underlying asset. Capital market refers to the market for long-term securities. Money market deals with short-term borrowing and lending.

Derivatives are contracts between two parties that derive their value from an underlying asset, such as stocks, bonds, commodities, or currencies.
Capital market is where long-term securities like stocks and bonds are bought and sold.
Money market deals with short-term borrowing and lending, typically for periods of one year or less.
Net Asset Value (NAV) is the value per share of a mutual fund and is calculated by dividing the total value of the fund's assets by the number of outstanding shares.
Forward contracts are agreements to buy or sell an asset at a predetermined price on a future date.
Futures contracts are similar to forward contracts but are standardized and traded on exchanges.
Options give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period.
Example: A company may use derivatives to hedge against price fluctuations in commodities it needs for production.
Example: The New York Stock Exchange is an example of a capital market.
Example: Treasury bills are commonly traded in the money market.
Example: The NAV formula is NAV = (Total Value of Assets - Total Liabilities) / Number of Outstanding Shares.

Accepted Answer

Derivatives:

It is a financial instrument which derives its value from underlying asset.

NAV formula:

AUM/No of outstanding share

Capital market:

Capital market is market where the long term instrument are traded.

Money market:

short term instrument are traded which is less than a year eg.treasury bills

What are derivatives, capital market, money market?. What is the formula for NAV?. What are forward, futures and options?.

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