Embeded Derivatives

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Hi to all

What is Embeded Derivative?

plz guide me

thanx & regards

othewise u can mail me at akyrj7 @ gmail.com

thanx to all

Replies (2)

Dear Akshay,

embedded derivative


Definition

A component of a hybrid security that is embedded in a non-derivative instrument. An embedded derivative can modify the cash flows of the host contract because the derivative can be related to an exchange rate, commodity price or some other variable which frequently changes. For example, a Canadian company might enter into a sales contract with a Chinese company, creating a host contract. If the contract is denominated in a foreign currency, such as the U.S. dollar, an embedded foreign currency derivative is created. According to the International Financial Reporting Standards (IFRS), the embedded derivative has to be separated from the host contract and accounted for separately unless the economic and risk characteristics of both the embedded derivative and host contract are closely related.



Read more: https://www.investorwords.com/7138/embedded_derivative.html#ixzz19btHOlIc

https://acct.tamu.edu/swanson/Readings_in_PDF/EmbeddedDerivativesEx.pdf

Please go through the link.


CA Rachit K Patel

Thanx a lot

thanx for guide me


CCI Pro

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