A derivative security is a ﬁnancial asset that:

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A derivative security is a financial asset whose value is linked to the price movement of another asset, such as a stock, bond, or commodity. Derivatives have no inherent value on their own but derive their value from the underlying asset. For example, a futures contract is a derivative that allows an investor to buy or sell an underlying asset at a fixed price at a future date. Options contracts are another common type of derivative security that give the holder the right, but not the obligation, to buy or sell an underlying asset at a certain price within a specified time period.

A Derivative Security Is a ﬁNancial Asset That