Derivatives are financial instruments that derive their value from other more fundamental variables, such as the price movements stocks, bonds, or commodities; interest rates changes; and even the prices of other derivatives. The most common classes of derivative securities are futures, forwards, swaps, and options. Futures and forwards are contracts whereby two parties (say a large group of farmers and Unilever or Kellogg’s) agree to a future trade at a specific time and price. Common types of futures include oil, cattle, and U.S. Treasury bond futures. The main difference between forwards and futures is that futures trade in the open market (like stocks or bonds) whereas forwards are private contracts.
Swaps are similar to futures and forwards, but the agreements are for multiple trades in the future. For example, an insurance company might agree to pay the interest on a floating rate security it owns to a hedge fund that agrees to pay a fixed rate in return. This sort of agreement would be struck because the cash flows better match the two parties’ risk profile and funding needs.
Options are contracts where two parties agree to a possible trade in the future (“possible” because one party has the right but not the obligation to complete the trade). If the buyer has the right, this is a “call.” If the seller has the right, it is a “put.”
Derivatives are used for three main purposes. Despite attention-grabbing headlines that suggest they are always exotic, volatile, and potentially very lucrative financial instruments, they are mainly used to hedge or provide financial insurance.
Arbitrageurs also use them, seeking to exploit differences in prices for identical instruments in different markets in an attempt to earn a riskless profit. Finally, speculators looking to make spectacular profits use derivatives. In a corporate finance role, you will mainly have to construct, pitch, and/or evaluate simple as well as extremely complex derivative instruments for hedging and financial insurance.
Although this can't be summed up in a sentence, paragraph, chapter, or even a book, there were a number of important events that caused and/or fueled the crisis. First, over several years, consumer and corporate borrowing reached record levels due to low interest rates and friendly borrowing conditions.
This is not a fluff question meant to trip you up by surreptitiously getting at some weakness of yours. Instead it's used to find out if you really do learn from your mistakes and, if so, how you learn from them, as well as how you might be able to grow as an employee and thus help the company to which you're applying.
One way to begin this is answer is by saying that you’ve gained a lot of experience leading teams and groups in college and in your past jobs, and have encountered this situation a few times. Then you could say that you’ve found the key first step to dealing with an underperforming colleague was honest communication.
The journey to becoming an attorney is a windy road filled with late-night study sessions, high-pressure exams, and tough competition—all of which can contribute to mental health challenges. With an estimated 40% of law students experiencing depression by graduation, it is important to understand that you are not alone if you are suffering from depression.