• Derivatives are financial contracts entered into between two or more parties, the value of which is determined by the underlying asset, group of assets or benchmark.

  • The derivative can be traded on an exchange or over the counter.
  • Prices for derivatives depend on fluctuations in the underlying asset.
  • Derivatives are usually leveraged instruments, which increases their potential risks and rewards.
  • Common derivatives include futures contracts, forwards, options and swaps.