What Is a Derivative Contract?
The so-called derivatives refer to things derived from native products, and financial derivatives are transaction forms derived from basic financial products.
Derivative contracts
Right!
- Chinese name
- Derivative contracts
- Foreign name
- Derivative contracts
- Nature
- A bilateral contract that transfers risk
- Derivatives
- Derived from the original
- Application area
- Finance, etc.
- The so-called derivatives refer to things derived from native products, and financial derivatives are transaction forms derived from basic financial products.
- definition
- According to the definition of the financial community, a financial derivative is a bilateral contract that involves swapping cash flows or is designed to transfer risk for a trader. The value is determined by the price of the financial asset it trades, and usually includes futures contracts, options contracts, forward contracts, swap agreements, etc.
- Derivative contracts are generally defined as a private contract derived from certain underlying assets, interest rates, and indices, such as stocks, bonds, or commodities. The simplest example is a foreign exchange forward contract. This foreign exchange forward contract is a commitment type contract that purchases a certain amount of foreign exchange at a certain price in the future. Initially, the value of such a contract is zero (if the price is stable), but as the exchange rate changes over a period of time, it will generate gains or losses. The cash position of foreign exchange can be fully copied by the position of a short-term bill of exchange and the long position of a forward contract.