See Also:
Finance Beta Definition
Finance Leverage Definition
Hedge Funds
Hedging Risk
Financial RatiosDerivatives – Finance DefinedIn finance, a derivative is a contract that derives its value from an underlying
asset or factor. In short, the value of a derivative depends on the value of something else. When the value of the underlying factor changes, the value of the derivative instrument changes. Derivatives are often used for speculation or for hedging risk.
Derivatives Instruments Common derivatives include futures, forwards, options, and swaps. Common underlying assets or factors include stocks,
bonds, currency exchange rates, commodities, market indices, and
interest rates. However, derivatives can derive their value from almost anything, including weather data and political election outcomes.