 In this lesson, we're going to talk about some of the more advanced financial derivatives. Now you'll find some pretty extensive notes in the actual lesson content page. So I'm going to kind of do a summary here with these slides. And the first financial derivative that we're going to talk about is a swap. Now swap is an exchange of payments between two parties. It can be a form of hedging. It can also be used for outright trading. So speculative traders can use swaps to try and make some revenue. These are generally known as over-the-counter. That is, they're not traded on an official exchange such as NYMEX. But you do find them on electronic platforms such as NYMEX's Clearport or the Intercontinental Exchange. And then also swaps can be had by dealing with the so-called voice brokers, literally a broker that you call up and arrange for a swap transaction. Now these are strictly financial. In some cases there's no physical commodity involved. You're strictly swapping out price. Now there are two pieces in a swap agreement. One is a fixed price and the other is a floating price. So we refer to swaps as fixed for floating. One party will pay a fixed price at the time that the swap is actually entered into and the other pays the floating price. And that's the price that is not known at the time. You have to wait till a settlement of the respective underlying contract. Now we talk about the NYMEX look-alike because it's the most commonly used swap. It's a Henry Hub financial swap and one party buys or sells at the current market which would be the fixed or known price. In other words, whatever the NYMEX is currently trading at. And then the counterparty buys or sells. The opposite party is going to take the opposite position and they'll buy or sell based on the NYMEX settlement. Now this is your floating price and it's unknown at the time of the swap transaction. So in other words, the price floats as we know every day as NYMEX changes. So you set a price on the day that you enter into the swap for the specific month and the commodity that you're interested in. And then in essence the two counterparties, you and your counterparty are going to wait until the NYMEX contract settles and then you're going to go ahead and true up to see who owes who money. And again, it's financially settled every month. And then we've also addressed the basis swaps. Again, there's more detail and specific examples in the lesson content. But really in the case of a basis swap, we're looking at the current market value. The current market value you can find on NYMEX's Clearport system or if you have access to the Intercontinental Exchange, you will see natural gas basis swaps quotes for the various cash locations that we have reviewed in the publications such as Plats. And then we have to come up with the second part of this. In other words, the floating price. We can fix the price based on the values on those electronic platforms I mentioned. But then to settle with our counterparty, we have to wait until the settlement of the basis. Now we know when the NYMEX final settlement occurs and so we'll have that piece of the basis swap settlement. But then we're waiting for the cash prices to come out. So in other words, Plats has their monthly price guide or as I notice it's noted, it's more commonly known as the inside FERC postings. So those are the first of month cash prices for the respective location. When you take the NYMEX settlement and you find the cash location, that difference becomes what we call actual basis. It is the settlement price for the basis swap for that particular location.