A derivative is a specific contract that receives its value based on the price fluctuations of some traded asset, group of assets, or benchmark. It is an agreement between parties that may be traded on a particular market.

These contracts have various applications and come with their own risks. The prices of derivatives are influenced by price changes in the underlying asset. They are commonly used to gain access to certain markets and can be traded for risk-hedging purposes. Derivatives can be utilized to both mitigate risk and speculate for potential profits. They facilitate the transfer of risk and associated rewards from those who are risk-averse to risk-takers.