Derivative security

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The BFX educational workshops are specifically designed to enable university students to increase their knowledge and understanding of how modern electronic financial derivative exchanges function.
Recommendation: To provide more useful and timely information to taxpayers on the status of financial derivative guidance projects, the Secretary of the Treasury and the Commissioner of Internal Revenue should consider additional, more frequently updated reporting to the public on ongoing projects listed in the PGP, including project status, changes in priorities, and target completion dates both within and beyond the 12-month PGP period.
The sudden rise in gold prices triggered a collapse in Ashanti's financial derivative program, which made the company liable for more than half a billion dollars in new debt, in addition to preexisting debt.
12, the Twenty Fourth Resolution of Modifications to the Miscellaneous Tax Resolution for 2000 and its annexes 5,7 and 14 amended and added rules related to the definition of financial derivative transactions of debt, the elimination of the withholding obligations of financial intermediaries that participate in the sale of shares by Mexican or foreign legal entities in authorized brokerage houses, and other provisions related to the payment of interest and calculation of the consumption tax in the sale of vehicles, jewelry and gold.
In fact, the language of financial derivatives recognizes that risks are exchanged, rather than simply transferred: The two parties to a financial derivative usually are referred to as "counterparties," rather than as cedent and receiver.
Wall Street's "rocket scientists" continually are creating new, complex, sophisticated financial derivative products.
Since their inception in the early 1970s, financial derivative instruments have mushroomed very quickly from simple financial futures to a wide variety of exotic and complicated securities.
Constantinides presents students, academics, researchers, and professionals working in a variety of contexts with an examination of a wide variety of financial derivative markets, their accompanying valuation, and restrictions on their trade.
The firm also said that it was planning to dispute certain claims arising from its financial derivative instruments in US courts.
In particular, the Recommendation suggests that the information on financial derivative instruments should be based on "fair value".
They describe a number of problem-solving approaches in order to bridge related comprehensive techniques for pricing different types of financial derivatives, and include both discrete-time and continuous-time financial models that form the cornerstones of financial derivative pricing theory.
Financial derivative contracts are fundamentally different from agricultural futures owing to the nature of the underlying asset from which the derivative contract is "derived." Supplies of foreign exchange, government securities, and certain other financial instruments are being continuously replenished, and large inventories held throughout the world are immediately available to be offered in markets if traders endeavor to create an artificial shortage.

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