Derivative is a financial instrument that derives its value from the movement/performance of one or many underlying assets. The main difference between derivatives and equity is that equity derives its value on market conditions such as demand and supply and company related, economic, political, or other events.
In respect to this, what is derivative with example?
Common underlying instruments include bonds, commodities, currencies, interest rates, market indexes and stocks. A futures contract, for example, is a derivative because its value is affected by the performance of the underlying contract.
How do derivatives markets work?
The value of such a contract is determined by changes or fluctuations in the asset where it derives its value from. The derivatives market is where these instruments are traded. Usually, the underlying assets used in derivatives are bonds, stocks, commodities, currencies, market indexes, and interest rates.
What is equity and derivative trading?
In finance, an equity derivative is a class of derivatives whose value is at least partly derived from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other types of equity derivatives that are actively traded.