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Derivatives are financial instruments whose value is based on the market value of an underlying asset such as a stock, bond, or commodity.

Additional Comments:

A contract that changes in value in relation to the price movements of a related or underlying security, futures contract, or other physical instrument. An option is the most common derivative instrument.

Examples of derivatives are futures contracts, options, and forward contracts. Derivatives are generally used by institutional investors to increase overall portfolio return or to hedge portfolio risk.

Related Terms:

A term used to designate all contracts covering the purchase and sale of financial instruments or ...

Futures Contracts
Agreement to buy or sell an underlying security at a predetermined date at an agreed price. ...

A trader who enters the market with the intent to protect a position in the underlying ...

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