DERIVATIVE Definition

Bookmark and Share

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.

Learn new Accounting Terms

CORPORATION is a type of business organization chartered by a state and given many of the legal rights as a separate entity.

MEDIUM TERM usually encompasses a calendar of 2-3 years or less.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.