Back عقد اشتقاقي Arabic Deriváu financieru AST Törəmə Maliyyə Alətləri Azerbaijani Вытворны інструмент (дэрыватыў) Byelorussian Дериват (финанси) Bulgarian Derivat financer Catalan Finanční derivát Czech Derivat (finansiering) Danish Derivat (Wirtschaft) German Παράγωγο προϊόν Greek
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In finance, a derivative is a contract between a buyer and a seller. The derivative can take various forms, depending on the transaction, but every derivative has the following four elements:
- an item (the "underlier") that can or must be bought or sold,
- a future act which must occur (such as a sale or purchase of the underlier),
- a price at which the future transaction must take place, and
- a future date by which the act (such as a purchase or sale) must take place.[1]
A derivative's value depends on the performance of the underlier, which can be a commodity (for example, corn or oil), a financial instrument (e.g. a stock or a bond), a price index, a currency, or an interest rate. [2][3]
Derivatives can be used to insure against price movements (hedging), increase exposure to price movements for speculation, or get access to otherwise hard-to-trade assets or markets.[4] Most derivatives are price guarantees. But some are based on an event or performance of an act rather than a price. Agriculture, natural gas, electricity and oil businesses use derivatives to mitigate risk from adverse weather.[5][6] Derivatives can be used to protect lenders against the risk of borrowers defaulting on an obligation.[7]
Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default swaps. Most derivatives are traded over-the-counter (off-exchange) or on an exchange such as the Chicago Mercantile Exchange, while most insurance contracts have developed into a separate industry. In the United States, after the 2007–2008 financial crisis, there has been increased pressure to move derivatives to trade on exchanges.
Derivatives are one of the three main categories of financial instruments, the other two being equity (i.e., stocks or shares) and debt (i.e., bonds and mortgages). The oldest example of a derivative in history, attested to by Aristotle, is thought to be a contract transaction of olives, entered into by ancient Greek philosopher Thales, who made a profit in the exchange.[8] However, Aristotle did not define this arrangement as a derivative but as a monopoly (Aristotle's Politics, Book I, Chapter XI). Bucket shops, outlawed in 1936 in the US, are a more recent historical example.
- ^ Durbin, Michael (2011). All About Derivatives: The Easy Way to Get Started (2nd ed.). New York: McGraw-Hill Education LLC. p. 1. ISBN 978-0-07-174351-8.
- ^ Derivatives (Report). Office of the Comptroller of the Currency, U.S. Department of Treasury. Retrieved February 15, 2013.
A derivative is a financial contract whose value is derived from the performance of some underlying market factors, such as interest rates, currency exchange rates, and commodity, credit, or equity prices. Derivative transactions include an assortment of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations thereof.
- ^ "Derivative Definition", Investopedia
- ^ Koehler, Christian (May 31, 2011). "The Relationship between the Complexity of Financial Derivatives and Systemic Risk". pp. 10–11. SSRN 2511541.
- ^ Turvey, Calum G. (Autumn–Winter 2001). "Weather Derivatives for Specific Event Risks in Agriculture". Review of Agricultural Economics. 23 (2): 333–351. JSTOR 1349952.
- ^ Durbin op cit. p. 1.
{{cite book}}: Missing or empty|title=(help) - ^ Durbin op cit. p. 59.
{{cite book}}: Missing or empty|title=(help) - ^ Crawford, George; Sen, Bidyut (1996). Derivatives for Decision Makers: Strategic Management Issues. John Wiley & Sons. ISBN 9780471129943. Retrieved June 15, 2016.