Saturday 9 February 2013

Derivative basics



Derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying asset class  include stocks, bonds, commodities, currencies, interest rates and market indexes.

Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes.
   



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