Derivatives

Financial contracts like swaps and options, whose characteristics and value derives from the characteristics and the values of underlying assets or indices like securities prices, interest rates, foreign exchange rates, market indexes, or commodity prices. Investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These contracts can also be used for speculative purposes. The techniques can be quite complicated and quite risky.