A derivative is a securitized contract between two or more parties whose value is dependent upon or derived from one or more underlying assets. Its price is determined by fluctuations in that asset, which can be stocks, bonds, currencies, commodities, or market indexes.
 | | Term of the Day | Words to Know | | |  | | Derivative | A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets—a benchmark. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset.
The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes. These assets are commonly purchased through brokerages. | | Read More » | | Options Contract | | An options contract allows the holder to buy or sell an underlying security at the strike price or given price. The two notable types of options are put options and call options. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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