What are the three derivative securities?
Could you please elaborate on the nature of derivative securities? I'm interested in understanding what the three primary types of derivative securities are and how they operate within the financial markets. Could you explain the characteristics of each type, including their risks and potential rewards? Additionally, I'm curious about the role derivative securities play in hedging strategies and portfolio diversification. Would you mind providing some examples or scenarios to illustrate their practical applications? Thank you for your assistance in clarifying this complex topic.