What are derivatives?

Tim Bennett explains what derivatives are, and how you can use them to your advantage.

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Tim Bennett explains what derivatives are, and how you can use them to your advantage.

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What are futures?

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Derivative

As such, they can be used either to gamble or to reduce the risk of ('hedge') an investment in the underlying security. Examples of derivatives are futures, options and swaps. For instance, an option is a derivative because its value changes in relation to the performance of an underlying stock.

Entry from MoneyWeek's Financial glossary.

Tim Bennett

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.

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