Options
Financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not obligation, to buy (call) or sell (put) security of other financial asserts at agreed-upon price (the strike price) during a certain period of time or on specific date (exercise date)
Bond
Bond is a debt investing in which an investor lends a loan to an entity (typically company or governmental ) which borrows money for a defined period of time at variable and fixed interest rate. Bonds are used by companies, municipalities, states and sovereign countries to raise funds and finance variety of project and activities. Owners of bonds are debtholder or creditors of issuers.
Swap
Traditionally swap was an exchange one security to another to change maturity date (bond), quality of issues (stock or bond), or because financial objectives have been changed. Recently, swaps have been grown to include currencies swap and interest rates swap.
Ex. Assume company A is a new company with low credit rate. It got a loan of 5m at floating rate of 5%. Now assume that company B is a company with a good credit rate that got a loan of 5m at fixed rate 6%. Because rate is now 4% swap between A and B would benefit both companies.
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