What does Derivative mean? Read on to discover the definition & meaning of the term Derivative - to help you better understand the language used in insurance policies.
A financial instrument whose value depends, at least in part, on the value of a related asset or liability. In essence, its value is "derived" from the values of some underlying asset such as a commodity or stocks. For example, if an individual or business owns an option to purchase 1,000 shares of a particular stock at a set price, the value of the option will increase as the value of the stock increases. Risk managers and financial officers often deal in derivatives as a technique for managing their business risks.
We hope the you have a better understanding of the meaning of Derivative.