Post Views: 2,455

A derivative is a contract between two parties that derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards, and swaps.

It is a financial instrument that derives its value/price from the underlying assets. Originally, the underlying corpus is first created which can consist of one security or a combination of different securities. The value of the underlying asset is bound to change as the value of the underlying assets keeps changing continuously.

Generally, stocks, bonds, currency, commodities, and interest rates form the underlying asset.