Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (December 2009) ( Learn how and when to remove this template message)A real estate derivative is a financial instrument whose value is based on the price of real estate. The core uses for real estate derivatives are: hedging positions, pre-investing assets and re-allocating a portfolio.
The major products within real estate derivatives are: swaps, futures contracts, options (calls and puts) and structured products. Each of these products can use a different real estate index. Further, each property type and region can be used as a reference point for any real estate derivative. For the employee incentive, see Employee stock option. The strike price may be set by reference to the spot price (market price) of the underlying security or commodity on the day an option is taken out, or it may be fixed at a discount or at a premium.
Definition of Call and Put Options:Call and put options are derivative investments (their price movements are based on the price movements of another financial product, called the underlying). A call option is bought if thA derivative is a financial instrument whose value is derived from another entity which is also known as the underlier. Theunderlier (or underlying) can range from assets such as commodities, stocks, real estate, andfinancial indicators such as stock market put and a call option derivative, interest rates, consumer price index.Other more exotic derivatives have also been launched in recent years.
They include derivatives on weather conditions and carbon emissions. The underlier can also be another derivative. Such a derivative of a derivative would be known as a second generation derivative.Uses of DerivativesDerivatives can be used by investors to remove (or mitigate) the risk of losses to their holdings that are caused by fluctuationsin the value of the underlying. This activity is known as hedging.
Option a and call derivative put