Derivatives

A way of investing in a particular product or security without having to own it. A derivative is a financial instrument whose value is based on one or more underlying assets. The investment is a financial contract that specifies conditions when payments must be made. The value of the derivative depends on what happens to some attribute of the asset: the price of a commodity, the interest rate on a security, the price of a stock, etc. The most common types of derivatives are: forwards, futures, options, and swaps. The most common underlying assets include: commodities, stocks, bonds, interest rates and currencies.