Derivative

Definition - What does Derivative mean?

A security which derives its value in whole or in part based on the price of another security. Options and futures are examples of derivative securities.

Testopedia explains Derivative

Investors who trade in derivative securities such as options and futures contracts need to have a higher level of sophistication. These investors will not only be required to understand the risks and pricing characteristics of the derivative but also those of the underlying security or commodity.

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