Derivatives and Their Uses

In this section

• What Derivatives Are
  Understand derivatives as contracts whose value depends on an underlying asset, rate, index, or other reference.
• How Derivatives Derive Value
  Learn how derivative prices are linked to movements in underlying assets, rates, currencies, indexes, and commodities.
• Why Derivatives Are Used in Finance
  Learn the main uses of derivatives in practice, including hedging risk, speculating on price moves, and arbitrage.
  • How Derivatives Are Used for Hedging
    Understand hedging as the use of derivatives to reduce or offset unwanted exposure to market risk.
  • How Derivatives Are Used for Speculation
    Learn how traders use derivatives to take directional views and magnify gains or losses through leverage.
  • How Derivatives Are Used for Arbitrage
    Understand arbitrage as the use of derivatives and related markets to exploit temporary pricing differences.
• Common Derivative Instruments
  Compare the main derivative contract types, including options, futures, forwards, and swaps.