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Derivatives are financial instruments which have their value determined by (derived from) the value of an underlying instrument, figure, result, or event. They come in a wide array of types and purposes. Some are standardized and traded on exchanges, while others are customized and transacted over-the-counter. Derivatives were originally created for the purposes of hedging, and maintain that focue in many ways, though speculators have taken to them as well.

Types of Derivatives

The most commonly known derivatives are options and futures. There are also forwards, warrants, and swaps.