DERIVATIVE Definition

DERIVATIVE is a transaction or contract whose value depends on or, as the name implies, derives from the value of underlying assets such as stock, bonds, mortgages, market indices, or foreign currencies. One party with exposure to unwanted risk can pass some or all of the risk to a second party. The first party can assume a different risk from a second party, pay the second party to assume the risk, or, as is often the case, create a combination. Derivatives are normally used to control exposure or risk. See DERIVATIVE CONTRACT.

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DISCOUNT ALLOWED, normally, is a reduction of the invoice amount for early payment of the invoice value.

CASH DIVIDEND is the payment of earnings to shareholders.

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