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Derivative Security
(redirected from derivative instrument)

   Also found in: Dictionary/thesaurus, Wikipedia 0.01 sec.
Derivative security
A financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlying asset.

Derivative Security
Futures, forwards, options, and other securities except for regular stocks and bonds. The value of nearly all derivatives are based on an underlying asset, whether that is a stock, bond, currency, index, or something else entirely. Derivative securities may be traded on an exchange or over-the-counter. Derivatives are often traded as speculative investments or to reduce the risk of one's other positions. Prominent derivative exchanges include the Chicago Mercantile Exchange and Euronext LIFFE.


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1 KBP962 While the production, investment, and pricing of many commodities that play a large role in many Muslim countries' economies are affected by the use of derivatives instruments for risk management and trading in the international market, these derivative instruments generally evolved in non-Islamic environments and systematic study of their noncompliance or disharmony with precepts of Islamic finance is necessary if they are to be adopted by Muslime economies.
To qualify for this specialized treatment, a derivative instrument must meet certain criteria to prove that it is associated with the hedgeable item.
133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments.
 
 
 
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