Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.
Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into Euros.
Investment dictionary. Academic. 2012.
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derivative — de·riv·a·tive 1 /də ri və tiv/ n: a contract or security that derives its value from that of an underlying asset (as another security) or from the value of a rate (as of interest or currency exchange) or index of asset value (as a stock index) ◇… … Law dictionary
Derivative — De*riv a*tive, a. [L. derivativus: cf. F. d[ e]rivatif.] Obtained by derivation; derived; not radical, original, or fundamental; originating, deduced, or formed from something else; secondary; as, a derivative conveyance; a derivative word. [1913 … The Collaborative International Dictionary of English
Derivative — De*riv a*tive, n. 1. That which is derived; anything obtained or deduced from another. [1913 Webster] 2. (Gram.) A word formed from another word, by a prefix or suffix, an internal modification, or some other change; a word which takes its origin … The Collaborative International Dictionary of English
derivative — [adj] borrowed, transmitted from source acquired, ancestral, caused, cognate, coming from, connate, copied, evolved, hereditary, imitative, inferential, inferred, not original, obtained, plagiaristic, plagiarized, procured, rehashed, secondary,… … New thesaurus
derivative — ► ADJECTIVE 1) chiefly derogatory imitative of the work of another artist, writer, etc. 2) (of a financial product) having a value deriving from an underlying variable asset. ► NOUN 1) something which is derived from another source. 2) a… … English terms dictionary
derivative — [də riv′ə tiv] adj. [ME derivatif < LL derivativus < L derivatus, pp. of derivare: see DERIVE] 1. derived 2. using or taken from other sources; not original 3. of derivation n. 1. something derived 2 … English World dictionary
derivative — early 15c. (adj.); mid 15c. (n.), from M.Fr. dérivatif (15c.), from L.L. derivativus, from pp. stem of L. derivare (see DERIVE (Cf. derive)). Mathematical sense is from 1670s … Etymology dictionary
Derivative — This article is an overview of the term as used in calculus. For a less technical overview of the subject, see Differential calculus. For other uses, see Derivative (disambiguation) … Wikipedia
derivative — Coming from another; taken from something preceding; secondary. That which has not its origin in itself, but owes its existence to something foregoing. Anything obtained or deduced from another @ derivative action A suit by a shareholder to… … Black's law dictionary
derivative — derivatively, adv. derivativeness, n. /di riv euh tiv/, adj. 1. derived. 2. not original; secondary. n. 3. something derived. 4. Also called derived form. Gram. a form that has undergone derivation from anoth … Universalium
derivative — [[t]dɪrɪ̱vətɪv[/t]] derivatives 1) N COUNT A derivative is something which has been developed or obtained from something else. ...a poppy seed derivative similar to heroin... This isn t an entirely new car, but a new derivative of the Citroen XM … English dictionary