Definition of derivative securities 126A derivative is a contract to buy or sell something in the future,namely the underlying.
All contract details(such as the price, the quantity to be bought orsold, the maturity, etc.)are fixed at the time you enter thecontract.
The price of the derivativedepends on the underlying.The underlying can be everything aslong as it is clearly defined!Examples:Financial prices: stocks, bonds, stock-indices, exchange rates
Commodities: oil price, gold, copper, coffee, orange juice concentrate, wine, energy, weather
In most cases the underlying is the price of a traded asset!Derivative securities: Introduction