Interest rate swaps are derivative instruments commonly used by sophisticated investors to allow cash flows on interest earning securities or loans to be exchanged. One of the most common examples of an interest rate swap is when two parties have different terms on loan agreements (e.g. fixed vs. variable interest rates), and one party undertakes payments linked to short-term floating interest rates (such as LIBOR) in order to receive fixed payments. The counterparty to this transaction then undertakes the fixed payments. But how do these interest rate swaps work? Salman Khan of the Khan Academy explains.

Derivative instruments commonly used by sophisticated investors, interest rate swaps allow cash flows on interest earning securities or loans to be exchanged. One of the most common examples of an interest rate swap is when two parties have different terms on loan agreements (e.g. fixed vs. variable interest rates), and one party undertakes payments linked to short-term floating interest rates (such as LIBOR) in order to receive fixed payments. The counterparty to this transaction then undertakes the fixed payments. But how do these interest rate swaps work? Salman Khan of the Khan Academy explains.

Fair value is used by investors to understand the relationship between the value of futures contracts and the current price of a stock. The term is used in pre-market hours to help forecast the direction of the market. Salman Khan of the Khan Academy explains.

Fair value is a tool used by investors to understand the relationship between the value of futures contracts and the current price of a stock. The term is used in pre-market hours to help forecast the direction of the market. Any differences are used by sophisticated investors to create arbitrage opportunities. Salman Khan of the Khan Academy explains.

For many sophisticated investors, trading options is a routine practice that can be hugely profitable. Salman Khan of the Khan Academy explains call options: contracts you purchase if you think a stock will go up in the near future.

Although inflation is not necessarily a bad thing for a growing economy, there have been numerous historical examples when inflation runs wild--a situation called hyperinflation. Some of the worst examples of hyperinflation have seen prices double in a matter of hours, with monthly inflation rates exceeding hundreds of trillions of percent. However, monthly inflation reaching 50% is generally considered to be the threshold for hyperinflation. What is hyperinflation, how does it occur and what happens to the value of money? Salman Khan of the Khan Academy explains.