What is the definition of a derivative?

Beginners

The word 'a derivative' is used to describe something that is based on or comes from something else. In finance, it can refer to a financial instrument whose value is based on the value of another asset. In mathematics, it can refer to the rate of change of one variable with respect to another. In simpler terms, a derivative is something that is developed or created from something else.

Intermediate

For intermediate, a derivative refers to a financial instrument whose value is based on the underlying asset or security. It can also refer to a mathematical concept that measures how much a function changes as its input changes. Additionally, it can mean a compound that is derived from a specific chemical or substance.

Advanced

In finance and mathematics, a derivative is a contract or security that derives its value from an underlying asset or group of assets. The underlying asset can be anything from stocks, bonds, commodities, currencies, or interest rates, which makes derivatives useful for hedging risk or speculating on changes in asset prices. Some common types of derivatives include options, futures, swaps, and forwards.