As A risk management tools; options and application of risk management stratejies in İMKB

ABSTRACT Derivatives are financial instruments whose value depents on the other instruments. Although derivative markets have been around in some for centuries, their growth has accelerated rapidly in the thirty years. When the Bretton Woods system collapsed in the early 1970's, a regime of fixed exchange rates constantly changing in response to the pressures of demand and suplly. The fact that currency prices moved constantly and often substantially in the new situation meant that business faced new risks. Derivatives devoleped in response to the need to manage those risks. Forwards, futures, swaps and options are derivatives instruments which are used widely in this market. Options are deferred delivery contracts that give buyers the right, but not the obligation, to buy or sell a specified commodity or security at a set price on or before a specified date. Since the opening of trading in stock options on the Chicago Board Options Exchange in 1973, the growth of trading in financial options worldwide has been spectacular. Huge volumes of options are also traded over the counter by banks and other financial institutions. The underlying assets include stocks, stock indices, foreign currencies, debt instruments, commodities and future contracts. There are two basic types of options. A call option gives the holder the right to buy the underlying asset by a certain date for a certain price. A put option gives the holder the right to sell the underlying asset by a certain date for a certain price. General principle of options, including pricing, trading and hedging and individual characteristics and behaviour of the different types of options are investigated in this study. It also explains how to determine their prices and how to use them in investment and financial management strategies.