Derivative markets

Derivative markets appeared in order to hedge increasing risk after the fixed currency system of The Bretton Wood Agreement had been repealed and free-floating system had been started to utilize. The instruments of these markets; forwards, futures, options and swaps contracts are used for speculation and arbitrage as well. Despite the similarity of intended purpose of these contrats, they have dispareteness's in prosess. These new and complex structure markets lead to massive capitals moving. In this thesis, derivative markets are studied in terms of both financially and mathematically. In the beginning, financial markets are briefly explained. Then, in 3rd section forward contracts, in 4th section futures contracts, in 5th section options an in 6th section swaps are examined. Pricing of these contracts are theoretically explained and illustrated with examples. In final section, conclusion and recommendation are presented.