Derivatives


A derivative or derivative financial instrument (from Latin: derivare = to lead or draw off, derive) is a contract between two parties concluded on or off the stock exchange, which specifies the conditions for payments or payouts, such as term, maturity, underlying, multiplier and notional amount. More specifically, a derivative is a financial instrument whose price depends on other factors such as indices, equities or bonds. Experts differentiate between securitised and non-securitised derivatives. Non-securitised derivatives include, for example, options and futures traded on derivatives exchanges such as EUREX. Securitised derivatives include warrants and certificates.


Digital warrant


Digital warrants (from Latin: digitus = finger) are a type of exotic warrant or binary option. They work according to the principle of “all or nothing”. The payout is usually made in one of two ways: with allor- nothing warrants (or cash-or-nothing warrants), either the fixed amount is paid out to the investor or the option expires worthless. If the warrant is in the money at maturity, the warrant holder pays the agreed amount. If, on the other hand, the warrant is out of the money at maturity, the warrant holder does not receive a settlement payment, as with a standard warrant. With this form, there is a distinction between European-style digital warrants (binary, -simplex warrants) and American-style digital warrants (hit warrants). With an asset-or-nothing
warrant, the investor receives a specified equity or another underlying if the underlying is above the strike price at maturity.


Dirty price


The dirty price is the current price of a bond plus any interest that has accrued and thus the price to be paid when purchasing a bond (antonym: “Clean price”).


Disagio


Disagio, also known as discount, is the reduction to the par value.


Dividend


The share of a company’s profit which is distributed on a per share basis to shareholders. The annual general meeting decides the size of dividend and when it will be distributed. The amount of the dividend is based on the company’s profit. The executive board proposes the size of the dividend. The annual general meeting then passes the resolution with a simple majority. The dividend is usually paid out the day after the annual general meeting.

 

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