What Is A Derivative?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

A derivative is a financial product whose value is derived from another asset (also known as the underlying asset). Derivatives are frequently used for speculation and hedging of risk and the most common forms of derivatives are:

  • Futures
  • Options
  • Swaps

The derivatives market is vast and extremely liquid, but also very hard to quantify as many are sold OTC (Over-the-Counter) and therefore not regulated. It is estimated that in late 2011 the derivatives market may be worth over $700 trillion, compared to a global GDP of ~$60 trillion.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.