What is a Derivative (Finance) ?

A Derivative is a financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate, called he underlying. Derivatives are one of the three main categories of financial instruments, the other two being equities (stock) and debt (bonds and mortgages.

Derivatives include a variety of financial contracts, including futures, forwards, swaps, options, and variations of these such as caps, floors, collars, and credit default swaps.