Uk

South Africa

Sri Lanka

Taiwan

Thailand

Turkey

Venezuela these instruments sometimes are called derivative assets or contingent claims. Their values derive from or are contingent on the values of other assets. We discuss derivative assets in detail in Part Five, but the nearby box serves as a brief primer.

Options

A call option gives its holder the right to purchase an asset for a specified price, called the exercise or strike price, on or before some specified expiration date. An October call option on IBM stock with exercise price $100, for example, entitles its owner to purchase IBM stock for a price of $100 at any time up to and including the option's expiration date in October. Each option contract is for the purchase of 100 shares, with quotations made on a per share basis. The holder of the call need not exercise the option; it will make sense to exercise only if the market value of the asset that may be purchased exceeds the exercise price.

Source: www.msci.com.

derivative asset or contingent claim

A security with a payoff that depends on the prices of other securities.

call option

The right to buy an asset at a specified price on or before a specified expiration date.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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