Basics of Derivatives - CHARLES K. WHITEHEAD

A derivative is a financial instrument whose value is derived from changes in the value of an underlying item, such as other assets, instruments, or indexes. They are a means for a company to manage risk, but they can also be used by investors to speculate and increase risk. Financial derivatives have been blamed for sparking the global financial crisis in 2008. In this lecture, we will introduce the basics of derivatives, focusing on basic terms and characteristics, and how derivatives can be used to manage business risk.