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Derivatives
Learn about Derivatives with iMinds Money's insightful fast knowledge series.
In economics, a derivative is defined as a financial instrument or an “agreement” between two parties that is based on an “underlying” and generally tangible asset, such as a stock or a commodity. For example, during the process of purchase there is a financial exchange for what is essentially a material benefit or instrument. Therefore, a derivative merely “derives” its value from this underlying asset which is of true material value. Financial investors use derivatives as a means of leverage in what is known as the derivative market.
An example of a common form of derivative is that of a customer who walks into a store and purchases a cigar in exchange for money. In this case, the exchange is complete and both parties hold tangible items. However, if the customer had phoned the dealer in advance, requesting the cigar be held for two hours until he/ she arrived and the retailer agrees, then a derivative is created. The agreement is simply derived from a proposed exchange, that they will trade money for cigar in two hours, not now.
iMinds will hone your financial knowledge with its insightful series looking at topics related to Money, Investment and Finance.. whether an amateur or specialist in the field, iMinds targeted fast knowledge series will whet your mental appetite and broaden your mind.
iMinds unique fast-learning modules as seen in the Financial Times, Wired, Vogue, Robb Report, Sky News, LA Times, Mashable and many others.. the future of general knowledge acquisition.
In economics, a derivative is defined as a financial instrument or an “agreement” between two parties that is based on an “underlying” and generally tangible asset, such as a stock or a commodity. For example, during the process of purchase there is a financial exchange for what is essentially a material benefit or instrument. Therefore, a derivative merely “derives” its value from this underlying asset which is of true material value. Financial investors use derivatives as a means of leverage in what is known as the derivative market.
An example of a common form of derivative is that of a customer who walks into a store and purchases a cigar in exchange for money. In this case, the exchange is complete and both parties hold tangible items. However, if the customer had phoned the dealer in advance, requesting the cigar be held for two hours until he/ she arrived and the retailer agrees, then a derivative is created. The agreement is simply derived from a proposed exchange, that they will trade money for cigar in two hours, not now.
iMinds will hone your financial knowledge with its insightful series looking at topics related to Money, Investment and Finance.. whether an amateur or specialist in the field, iMinds targeted fast knowledge series will whet your mental appetite and broaden your mind.
iMinds unique fast-learning modules as seen in the Financial Times, Wired, Vogue, Robb Report, Sky News, LA Times, Mashable and many others.. the future of general knowledge acquisition.
4 pages, Kindle Edition
First published October 25, 2010
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Displaying 1 - 2 of 2 reviews
December 10, 2022
This is yet another book dealing with economics in this series. It discusses derivatives and their types and their impact on our economy.
“A derivative is defined as a financial instrument or an “agreement” between two parties that is based on an “underlying” and generally tangible assets, such as a stock or a commodity.”
The book is discussing about commodity derivatives and the financial derivatives. Financial derivatives became more important after the ending of the gold exchange standard in the 1970s in the USA.
This book is also discussing the vanilla derivatives. A vanilla option is that which gives the holder the right, but not the obligation, to trade an underlying asset at a predetermined price within a given timeframe.
There are four types of vanilla derivatives which are the options, forwards, futures, and swaps. All these four derivatives are discussed in detail.
If you are someone interested to read books discussing economics, this will be a good choice.
July 2, 2020
Don't waste your time. It's very short---article sized and you can probably just Google the information.
Displaying 1 - 2 of 2 reviews