Options, swaps, futures, MBSs, CDOs, and other derivatives

This course is a part of Finance and capital markets, a 10-course Topic series from Khan Academy.

This course contains 7 segments:

Put and call options

Options allow investors and speculators to hedge downside (or upside). It allows them to trade on a belief that prices will change a lot--just not clear about direction. It allows them to benefit in any market (with leverage) if they speculate correctly. This tutorial walks through option basics and even goes into some fairly sophisticated option mechanics.

Forward and futures contracts

In many commodities markets, it is very helpful for buyers or sellers to lock-in future prices. This is what both forwards and futures allow for. This tutorial explains how they work and what the difference is between the two.

Mortgage-backed securities

What started out as a creative way to spread risk ended up fueling a monster housing bubble. This tutorial explains what mortgage-backed securities are and how they work.

Collateralized debt obligations

Credit default swaps

Interest rate swaps

Black-Scholes formula

Options have been bought and sold for ages, but finding a rational way to price them seemed beyond our mathematical know-how... until 1973 when Fischer Black and Myron Scholes showed up and gave us the Black-Scholes model. This work was later extended by Robert Merton and now underpins much of modern finance.