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Why Is an Option a Zero-Sum Game?

The option contract (option) is a zero-sum game (not a win-win situation) because the gains made by the option's buyer...

What Is The Difference Between an Equity Call Swap and a Basis Swap?

An equity call swap is similar in concept to a basis swap as both involve two variable legs. The former...

What Is a Limit Option?

A limit option is, by definition, an exotic option whose payoff depends on whether the underlying asset price reaches a...

What Does a High Gamma of an Option Indicate?

Gamma is the second derivative of the option’s price with respect to the underlying price/ rate. It is usually considered...

Why Is the Futures Contract a Zero-Sum Game?

The futures contract is a zero-sum game (not a win-win situation) because if a trader is making money in futures...

What is the Relationship Between Swap Spreads and Treasury Yields?

A swap spread is the difference between the fixed interest rate and the yield of a Treasury security of the...

What Is the Difference Between a Cap and a Swaption?

By definition, a cap is a series of options called caplets, each written on a specific forward interest rate. In...

What Is The Difference Between Exercise Price and Strike Price?

Strike price and exercise price are often used "interchangeably " to denote the same: the price at which a derivative...