| - | Financial contracts or instruments derived from the value of another, underlying asset. They can be bought, sold and traded in a similar way to [[Share|share]]s or any other financial instrument. The underlying assets on which derivatives are based include commodities, equities, residential mortgages, commercial real estate, loans, [[Bond|bond]]s, interest rates, exchange rates, stock market indices, consumer price indices and weather conditions. [[Credit Derivatives|credit derivatives]] are based on loans, bonds or other forms of credit. The main types of derivatives are forwards, [[Futures|futures]], [[Option|option]]s and [[Swap|swap]]s. The pricing and performance of derivatives is largely based on the underlying asset. Derivatives often drive the underlying market and the volumes traded in certain futures and options contacts can exceed those of the underlying [[Cash Markets|cash markets]] markets. Derivatives can be traded on an exchange or in an over-the-counter ([[OTC]]) market.
| + | Derivatives are securities or financial instruments whose value is derived from the value of another, underlying asset. They can be bought, sold and traded in a similar way to [[Share|share]]s or any other financial instrument. The underlying [[Assets|assets]] or instruments on which derivatives can be based include commodities, equities, residential mortgages, commercial real estate, loans, [[Bond|bond]]s, [[Interest Rate|interest rate]]s, [[Exchange Rate|exchange rate]]s, [[Stock|stock]] market indices, consumer price indices and weather conditions. The main types of derivatives are [[Forward Contract|forward contract]]s, [[Futures|futures]], [[Option|option]]s and [[Swap|swap]]s. [[Credit Derivatives|Credit derivatives]] are based on loans, bonds or other forms of credit. The pricing and performance of derivatives is often based on that of the underlying asset, although the reverse may also be true. Derivatives can drive the underlying market and the volumes traded in certain futures and options contacts can exceed those in the underlying [[Cash Markets|cash markets]]. Derivatives can be traded on an [[Exchange|exchange]] or in an over-the-counter ([[OTC]]) market. Global derivatives traded market volume is in the hundreds of trillions of dollars annually. |