Derivatives

Forwards, futures, swaps and credit derivatives.

1. Forwards — A forward is a private agreement to buy or sell something at a set price on a future date. Here is how forwards work, why businesses use them and the counterparty risk that comes with a handshake deal.
2. Futures — Futures are standardized forward contracts traded on exchanges and backed by a clearinghouse. Here is how daily settlement works, why futures rarely end in delivery and how rolling contracts affects funds like USO.
3. Options as Derivatives — Options are derivatives with a one-sided payoff: the buyer has a right, not an obligation. Here is how options differ from forwards and futures, how they are priced and how they fit in the derivatives family.
4. Swaps — A swap is an agreement to exchange streams of payments, most often fixed interest for floating interest. Here is how interest rate swaps work, why companies use them and how total return swaps played a role in a famous 2021 collapse.
5. Credit Derivatives — Credit derivatives transfer the risk that a borrower defaults. Here is how credit default swaps work, how they spread risk before 2008 and what happened to AIG.
6. When Derivatives Go Wrong — Derivatives are useful tools, but leverage and hidden risks have caused some of finance’s biggest disasters. Here are famous blowups, from a bank brought down by one trader to oil futures that went below zero.