BANKING AFFAIRS

Detailed explanation-1: -Example of derivative securities is mortgage backed security. A derivative security is a financial instrument whose value depends upon the value of another asset. The main types of derivatives are futures, forwards, options, and swaps. An example of a derivative security is a convertible bond.

Detailed explanation-2: -An example of a derivative security is a convertible bond. Such a bond, at the discretion of the bondholder, may be converted into a fixed number of shares of the stock of the issuing corporation. The value of a convertible bond depends upon the value of the underlying stock, and thus, it is a derivative security.

Detailed explanation-3: -A good example of a derivative is the mortgaged-backed security ( MBS ), first issued in 1970 by the Government National Mortgage Association (GNMA, or Ginnie Mae, as it is usually called), which is created by the securitization of a pool of mortgages.

Detailed explanation-4: -Mortgage-backed securities (MBS) are investment products similar to bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them. Investors in mortgage-backed securities receive periodic payments similar to bond coupon payments.

Detailed explanation-5: -Mortgage derivatives are a type of financial investment instrument that depend on the underlying value of home mortgages. Investors buy and sell shares of these derivatives, which share many characteristics with traditional stocks and mutual funds.