derivative

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Derivative

A financial contract whose value is based on, or "derived" from, a traditional security (such as a stock or bond), an asset (such as a commodity), or a market index.

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.

derivative

An asset that derives its value from another asset. For example, a call option on the stock of Coca-Cola is a derivative security that obtains value from the shares of Coca-Cola that can be purchased with the call option. Call options, put options, convertible bonds, futures contracts, and convertible preferred stock are examples of derivatives. A derivative can be either a risky or low-risk investment, depending upon the type of derivative and how it is used. See also underlying asset.

Derivative.

Derivatives are financial products, such as futures contracts, options, and mortgage-backed securities. Most of derivatives' value is based on the value of an underlying security, commodity, or other financial instrument.

For example, the changing value of a crude oil futures contract depends primarily on the upward or downward movement of oil prices.

An equity option's value is determined by the relationship between its strike price and the value of the underlying stock, the time until expiration, and the stock's volatility.

Certain investors, called hedgers, are interested in the underlying instrument. For example, a baking company might buy wheat futures to help estimate the cost of producing its bread in the months to come.

Other investors, called speculators, are concerned with the profit to be made by buying and selling the contract at the most opportune time. Listed derivatives are traded on organized exchanges or markets. Other derivatives are traded over-the-counter (OTC) and in private transactions.

derivative

a financial instrument such as an OPTION or SWAP whose value is derived from some other financial asset (for example, a STOCK or SHARE) or indices (for example, a price index for a commodity such as cocoa). Derivatives are traded on the FORWARD MARKETS and are used by businesses and dealers to ‘hedge’ against future movements in share, commodity etc. prices and by speculators seeking to secure windfall profits. See LONDON INTERNATIONAL FINANCIAL FUTURES EXCHANGE (LIFFE), EUREX.

derivative

a financial instrument such as an OPTION or SWAP the value of which is derived from some other financial asset (for example, a STOCK or SHARE) or indices (for example, a price index for a commodity such as cocoa). Derivatives are traded on the FUTURES MARKETS and are used by businesses and dealers to ‘hedge’ against future movements in share, commodity, etc., prices and by speculators seeking to secure windfall profits. See LONDON INTERNATIONAL FINANCIAL FUTURES EXCHANGE (LIFFE), STOCK EXCHANGE.
References in periodicals archive ?
For the calculation of variances of fitted plane parameters, the following derivatives of D([theta], [phi], [P.
Real estate is the largest asset class not currently taking full advantage of derivatives," said Don Fewer, senior managing director for GFI, North America.
If the hedged asset were measured at fair value, the changes in values of the hedged item and the credit derivative may offset each other, reducing the volatility that arises when only the derivative is marked to market and not the hedged item.
Many international corporations, for example, use currency derivatives to swap out their exposure to exchange rate fluctuations.
As broad as the field of derivative accounting is, much of the concern over the rules is that they are too broad.
133 permits this special accounting for the change in value of derivatives designated and qualifying as fair value hedges, cash flow hedges or foreign currency hedges (see sidebar "FASB 133 Hedge Definitions").
The big difference between a derivative contract and a reinsurance contract is that the correlation between exposure and nonperformance is likely to be high in the case of reinsurance, whereas it is low with derivatives.
We're one of fewer than 10 investment banks that have a significant presence in the municipal derivatives market and the only firm that is not a major money-center bank," notes Rice from his office on the 52nd floor in the World Trade Center.
There are currently $70 trillion worth of derivatives being traded worldwide - nearly 10 times the U.
Donlon: How about on the financial side - derivatives in particular?
Today, Deriv/SERV electronically confirms 80% of credit derivatives traded globally, up from 40% in 2005.
NumeriX has long been known for its state-of-the art derivatives risk modeling capabilities.