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.

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.
References in periodicals archive ?
Thus, the definition of a derivative instrument used in Statement 53 is based on the "essential characteristics" approach.
To be characterized as effective, the derivative instrument must have the ability to offset between 80% and 125% of the changes in the fair value or cash flows of the hedged item.
While the vast majority of organizations responding require a specific assessment of the risks being managed for derivative instruments to qualify for special treatment, practice varied in the criteria organizations use to define and evaluate risk and the business levels at which risks are measured.
Can the entity begin to use new strategies or derivative instruments that will now qualify as hedges under Statement no.
A derivative instrument does not require an initial net investment in the contract that is equal to the notional amount (or the notional amount plus a premium or minus a discount) or that is determined by applying the notional amount to the underlying.
09 per share) in the first quarter of 2010, which included unrealised gains on derivative instruments of USD2.
IFIs aim to utilise derivative instruments to hedge against risk and to improve risk monitoring practices.