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What are investment derivatives?

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3rd Dec 2009 by Gary

A lot of people get confused when they hear the term derivative, as they usually misunderstand what a derivative actually is, and focus rather on what is involved with the derivative. For example, a derivative is nothing but a contract, but it's what's within the contract that most people get confused by. Of course that's understandable, as many derivatives are set up in ways that even many savvy investors have no idea what they mean. But as far as the purpose of a derivative, it's mostly used to hedge risk, although a growing number of people use them to speculate in the markets, causing all sorts or problems like are being experienced now in our current economic crisis. The more popular types of derivatives include swaps, options, forward and futures contracts. Most people should just stay away from these.

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19th Oct 2009 In Investing 1 Answers | 516 Views
Subjects: derivatives, investment,

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