Derivatives
Derivative
Definition
What is Derivative?
A contract whose value depends on an underlying assetThe asset, rate, index, or reference on which a derivative's value is based., rate, index, or event.
Example in practice
How This Looks in Practice
A share option changes value as the underlying share priceThe market price at which one share is quoted or traded. moves.
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Related Terms
Derivatives
Underlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
DerivativesFutures Contract
A standardised exchange-traded agreement to buy or sell an underlying asset at a future date.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.