could anybody explain to me what do you mean by derivatives?
Sids
(ARTICLESHIP)
(181 Points)
Replied 22 July 2010
Except Finance "Derivatives" is used in Mathematics(Calculus) & Chemistry also.
In finance, a derivative is a financial contract with a value linked to the expected future price movements of the asset it is linked to - such as a share or a currency. There are many kinds of derivatives, with the most notable being swaps, futures, and options. However, since a derivative can be placed on any sort of security, the scope of all derivatives possible is near endless. Thus, the real definition of a derivative is an agreement between two parties that is contingent on a future outcome.
A common misconception is to refer to derivatives as assets. This is erroneous, since a derivative is incapable of having value of its own. However, some more commonplace derivatives, such as swaps, futures, and options, which have a theoretical face value that can be calculated using formulas, such as Black-Scholes, are frequently traded on open markets before their expiration date as if they were assets.
Derivatives are usually broadly categorized by the:
Source:Wikipedia
CA Himanshu Bansal
(Risk Manager)
(2345 Points)
Replied 22 July 2010
A very good explanation by Sids..
To say in one line " A Derivative is a contract which derives its value from the underlying asset".
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