derivative

Definition

A financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky.

Use derivative in a sentence

Taking the derivative of the budget and utility equations allowed the economist to maximize his clients personal happiness within her means.

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The derivative market was speculating on which direction the price of gold would go, this market was eight times larger than the gold market.

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