Derivatives in a Dynamic Environment

An examination is made of derivatives in a dynamic environment. It is difficult to define financial derivatives in a dynamic environment. Purists might argue that any security is a derivative if its price dynamics depends on the dynamics of some other underlying asset or assets and time. This broad...

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Bibliographic Details
Published in:The American economic review 1998-06, Vol.88 (3), p.350-370
Main Author: Scholes, Myron S.
Format: Article
Language:English
Subjects:
Arbitrage
Business risks
Business schools
Business structures
Capital assets
Common stock
Costs
Derivatives
Economic models
Economic theory
Economics
Efficient markets
Finance
Financial investments
Financial services
Financial services industries
Futures
History
Hypotheses
Investment risk
Investment strategies
Mathematics
Nobel prizes
Options markets
Production costs
Securities markets
Securities trading
Statistical analysis
Stock options
Stock prices
Studies
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Summary:An examination is made of derivatives in a dynamic environment. It is difficult to define financial derivatives in a dynamic environment. Purists might argue that any security is a derivative if its price dynamics depends on the dynamics of some other underlying asset or assets and time. This broad definition allows not only for what currently exists but also what new derivative instruments will be developed in the future with enhanced understanding and changing production costs. The popular press, however, tends to limit the definition to include financial options, futures and forward contracts either traded on an exchange or issued in the OTC industry. In the future they may come to be called financial products.
ISSN:0002-8282
1944-7981