Corporation and Derivative instrument: Difference between pages

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Corporations are "artificial persons, who may maintain a perpetual succession, and enjoy a kind of legal immortality....", “are such as are created and devised by human laws for the purposes of society and government.” <ref>William Blackstone, Commentaries, Vol. 1, Chapter XVIII and Chapter 1, 1755/56, available for example at http://oll.libertyfund.org/title/2140</ref>
A derivative instrument or contract is one whose value and other characteristics are derived from those of another asset or instrument (sometimes known as the Underlying Asset).


In general, a corporation is a legal entity with separate existence from those making it up. It may be constituted by one person ("corporation sole") or by a group of people ("corporation aggregate"). Today, most corporations have perpetual succession irrespective of a person or persons ceasing involvement (including by death) though corporations may have a limited life specified in their instrument of creation. By way of contrast, an unincorporated club or a simple partnership, for example, have no separate legal existence apart from that of their members or partners.
Derivative instruments are widely used by non-financial corporates for hedging purposes.


Corporations may exist in common law or under a State's constitution or be established by Charter issued under Royal prerogative or by decree or equivalent, under a statute for the purpose or by registration under powers given by statute.


In some jurisdictions some corporations sole are seen as corporations aggregate, looking at successive holders of the office over time as a group. In common law monarchies, the Crown is normally treated as a corporation sole. A single person may hold several offices as corporation sole. For example, Elizabeth Alexandra Mary Windsor is Elizabeth II, Queen of the United Kingdom, constitutes the Crown in Great Britain and Northern Ireland and, as a separate corporation, constitutes HM The Queen in Right of New South Wales.
<span style="color:#4B0082">'''Example'''</span>


Frequently, but not always, corporations are established for the purposes of undertaking particular activities. Examples of activities would be conduct of a State, municipality (e.g. Mayor of London, England) or other local or regional government activities, ecclesiastical activities (e.g. (Roman Catholic) Archbishop of Baltimore, USA) or a business (e.g. The Hershey Company, a US corporation that makes and sells chocolate and other foods).  
A share option is a type of derivative contract, allowing the holder to buy shares at a certain predetermined strike price.  


In UK and most Commonwealth English, a corporation formed for the purposes of carrying a business is commonly known as a "company". In US English "corporation" is usually used for this meaning and "company" can take the wider meaning. US firms may, however, refer to themselves using the word "company". An example of this is the Wm. Wrigley Jr. Company, the chewing gum manufacturer merged into Mars Incorporated (another US food manufacturer) in 2008.  
The value of the share option derives from the current price of the related underlying share relative to the option strike price.


For more discussion of business corporations (companies) see [[Company]].


== See also ==
* [[CCR]]
* [[Collateral]]
* [[Commodity risk]]
* [[CP]]
* [[Credit support annex]]
* [[Embedded derivative]]
* [[ETD]]
* [[FC]]
* [[Fixing instrument]]
* [[FVTOCI]]
* [[FVTPL]]
* [[Hedge fund]]
* [[Hedging]]
* [[IR]]
* [[ISDA Master Agreement]]
* [[Margining]]
* [[Mark to market]]
* [[Maturity]]
* [[Notional principal]]
* [[Option]]
* [[Outright]]
* [[Potential Future Exposure]]
* [[Replacement cost]]
* [[Strike price]]
* [[Tracker fund]]
* [[Transfer]]
* [[Underlying]]
* [[Underlying asset]]
* [[Underlying price]]
* [[XVA]]


==See also==
* [[Articles of incorporation]]
* [[Company]]
* [[LLC]]
* [[Multinational corporation/company]]
* [[Partnership]]


===Other links===
*[http://www.treasurers.org/node/8599  Masterclass: Derivatives, ''Sarah Boyce,'' The Treasurer]


==References==
[[Category:Risk_frameworks]]
 
<references/>
 
[[Category:The_business_context]]
[[Category:Compliance_and_audit]]

Revision as of 14:52, 11 April 2018

A derivative instrument or contract is one whose value and other characteristics are derived from those of another asset or instrument (sometimes known as the Underlying Asset).

Derivative instruments are widely used by non-financial corporates for hedging purposes.


Example

A share option is a type of derivative contract, allowing the holder to buy shares at a certain predetermined strike price.

The value of the share option derives from the current price of the related underlying share relative to the option strike price.


See also


Other links

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