Financial derivative
From Recessipedia
Financial derivatives are contracts the value of which depends on the value of some underlying asset or assets, such as the price of an equity (stock) or bond. Investors and financial institutions use them to speculate (increase risk and return) and hedge (decrease risk and return) without affecting their balance sheets, or a summary statement of their assets (things owned) and liabilities (things owed). [1]
The major types of derivatives include forwards, futures, options, and swaps.[2] A type of financial derivative known as a credit default swap has been implicated in the Panic of 2009.
Notes
- ↑ Robert E. Wright and Vincenzo Quadrini, Money and Banking (Flat World Knowledge, 2009): http://www.flatworldknowledge.com/pub/1.0/money-and-banking/bank-management/balance-sheet-0.
- ↑ Robert E. Wright and Vincenzo Quadrini, Money and Banking (Flat World Knowledge, 2009): http://www.flatworldknowledge.com/pub/1.0/money-and-banking/financial-system/financial-markets.
