InvestorWords.com

derivative


Definition

A financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky.

Featured Tip

Hedging vs. SpeculatingHedging and speculating are the two primary ways in which forex derivatives are used. Hedgers use forex futures to reduce or eliminate risk by insulating themselves against any future price movements. ... Read more


Related Videos




Search for another term


Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z