A financial instrument to hedge or speculate on price movements by dismantling any asset into individual attributes and trading them without trading the asset itself. Derivatives take the form of financial contracts such as futures (an agreement to buy/sell an asset at a predetermined price at a future date), options (the opportunity but not the obligation to buy/sell an asset at a predetermined price at some point in the future), and swaps (allowing for the exchange of one asset flow for another), though they often involve a combination of all three. These contracts “derive” their value from an underlying asset such as commodities, equities, currencies, debt, mortgages, interest rates. Derivatives, in combination with leverage, have come to be the key form of speculative capital over the past few decades.

DEFINE: Defines derivatives as contracts (futures, options, swaps) whose value derives from an underlying asset, tradable without owning that asset.

Andrew deWaard, Derivative Media, loc. 486