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  • What Is A Derivative?: Underlying Asset Over-The-Counter

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    Zubaria Bashir
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    A derivative is a financial contract between two parties whose value is dependent on an underlying asset such as a stock, bond, commodity, currency, or market index. Derivatives allow parties to trade assets on an exchange or over-the-counter and prices derive from fluctuations in the underlying asset, with derivatives commonly used to hedge against risk or speculate to assume risk for potential reward.

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    A derivative is a financial contract between two parties whose value is dependent on an underlying asset such as a stock, bond, commodity, currency, or market index. Derivatives allow parties to trade assets on an exchange or over-the-counter and prices derive from fluctuations in the underlying asset, with derivatives commonly used to hedge against risk or speculate to assume risk for potential reward.

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    23 views1 page

    What Is A Derivative?: Underlying Asset Over-The-Counter

    Uploaded by

    Zubaria Bashir
    A derivative is a financial contract between two parties whose value is dependent on an underlying asset such as a stock, bond, commodity, currency, or market index. Derivatives allow parties to trade assets on an exchange or over-the-counter and prices derive from fluctuations in the underlying asset, with derivatives commonly used to hedge against risk or speculate to assume risk for potential reward.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    What Is a Derivative?

    The term derivative refers to a type of financial contract whose value is


    dependent on an underlying asset, group of assets, or benchmark. A
    derivative is set between two or more parties that can trade on an exchange
    or over-the-counter (OTC).

    These contracts can be used to trade any number of assets and carry their
    own risks. Prices for derivatives derive from fluctuations in the underlying
    asset. These financial securities are commonly used to access certain
    markets and may be traded to hedge against risk. Derivatives can be used to
    either mitigate risk (hedging) or assume risk with the expectation of
    commensurate reward (speculation). Derivatives can move risk (and the
    accompanying rewards) from the risk-averse to the risk seekers.

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