Definition 1.
Generically, derivatives are investments that are ""derived"" from something else. Options are derivatives, for instance, because the option has an underlying stock, commodity or other asset on which its price is based. Lately, however, the term derivatives has been used to describe highly complex financial instruments that have led to losses for some businesses and local governments, some of whom either didn''t know what they were doing or found themselves with a rogue employee.
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