This lesson introduces derivative instruments and the growing role of alternative investments in portfolio construction.
5.1 Derivative Instruments
Derivatives are financial contracts whose value is derived from an underlying asset. Core types include:
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Futures and Forwards:Â Contracts to buy or sell an asset at a future date at a set price.
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Options:Â Contracts giving the holder the right, but not the obligation, to buy (call) or sell (put) an asset.
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Swaps:Â Agreements to exchange cash flows.
The University of Nipissing syllabus covers “understand the role of derivatives including options and futures” . Derivative instruments are used in both risk management and speculative strategies.
5.2 Alternative Investments
Alternative investments include private equity, hedge funds, real estate, commodities, and collectibles . The Regent’s University module covers the development of a portfolio “comprising equities, bonds, real estate and alternative assets” . The University of Edinburgh syllabus includes “alternative investments” as a core topic .
5.3 Investing in Mutual Funds and Exchange-Traded Funds (ETFs)
Mutual funds and ETFs are vehicles for gaining exposure to asset classes. They are integral to portfolio construction, as described in the University of Edinburgh and MMI curricula .
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