BASIC OF DERIVATIVES
Introduction to the basic concept of derivatives Derivatives in general refer to contracts that derive from another - whose value depends on another contract or asset. Derivatives are essentially devised as a hedging device to insulate a business from risks over which a business has no or little control, but in practice, they are also used as yield-kickers. derivative 1 : arising out of or dependent on the existence of something else. 2 : of, relating to, or being a derivative de•riv•a•tive•ly adverb 3 : formed by derivation 4 : made up of or marked by derived elements There does that help? Not really. The reason it doesn’t help is because a derivative is really nothing in and of itself. So to say something is a derivative is really to say nothing at all unless you define what the derivative is deriving itself from (which still sounds confusing I agree). Let’s look at one more definition before we get into defining a derivative for ourselves. Definition of a derivat...