A fishy derivative contract June 13, 2008
Posted by James Webster in : finance , trackbackPrior to starting my new job (structured commodity derivatives IT), I was working with a team building a risk platform for an exotic equity derivatives desk. One of the most common OTC contracts the front-office would sell is known as an asian basket. Asian means that the strike price is not set at a predetermined absolute level (as is the case with American or European option styles) but rather taken as the average price of the underlying asset over a stated period of time before the option’s expiry. A basket option is a derivative contract that covers multiple underlying assets.
Now that I am in commodities I have been researching the field to understand it better. A broader range of commodities are traded on exchanges than I realized; in addition to the currently topical oil contracts traded on the NYMEX & ICE exchanges (and others), the agricultural contracts of the Chicago Board of Trade, and the base and precious metals contracts traded on many other global exchanges, there are exchanges in the Far East listing futures contracts over cocoons and raw silk.
Fish Pool is a recently established Norwegian exchange which provides a marketplace for trading forward contracts on fresh salmon. If they add contracts for other fish (tuna perhaps?) I wonder if a canny investment bank or hedge fund will come along and start offering the market ‘Asian seafood basket’ options 
Well… I thought it was amusing.
Continuing the recent market data theme… it appears the NYSE has decided to follow the path set by BATS and NASDAQ; NYSE to sell market data to Internet sites:
The New York Stock Exchange (Nyse) is gearing up to launch a low-cost real-time market data service for delivery over personal finance Web sites.
It would be great to see some cheap, public APIs from BATS, NASDAQ or NYSE to enable the construction of a simple Silverlight ticker with the new duplex service capabilities of Beta 2.
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