Economic Derivative

Economic derivative is a new form of the derivative contract that is completely differs from those traded in early 2002. The economic derivative depends upon the future value of some national economic indicator such as the index of the purchasing manager, the level of the retail sales, the product that is domestically grossed and non-farm payrolls. The economic derivatives come in digital or binary formats that mean there are only two options that are to be or not to be. This means that economic derivative of payroll will indicate that there will be the full payout as in the availability of the money or there will be no payout at all. The most attractive feature of economic derivative is that they have got the ability to mitigate the market and also help in mitigating the risks associated with standard investment methodologies.

The economic derivative can be explained by considering the example of trading on GDP. There may be a binary option on the trading of GDP that means the GDP will make the payment of its face value when the official release of the GDP is made that means the exercise date and the value of the GDP will range within a specific range that is called strike range. If the figure claiming for GDP is out of this range it will expires worthlessly.

The economic derivatives are compared with the Wall Street estimations by a number of marketers and investors so that they can find out the discrepancies between the two estimations.

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