A derivative is a financial contract whose value is based on — “derived from” — the price of another asset, called the underlying asset. A derivative has no independent value of its own; it entirely tracks the price behavior of its underlying, according to specific rules that depend on the type of derivative.
Main Types Covered in This Course
- Futures contracts — an obligation for both parties to transact at a fixed price on a future date
- Options contracts — a right, but not an obligation, for the buyer to transact at a fixed price by a certain date
Related Reading
Read the full introduction in What Are Derivatives? Futures and Options Explained Simply.