Glossary Term


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Derivatives are a class of financial instruments that have no inherent value of their own. Instead, they derive their value from an underlying asset. The value of a derivative changes according to the underlying asset it’s based on. Derivatives can be built on top of any market, the most popular being currency, stock, bond, interest rate, and index markets. Derivatives are often used to create paper versions of markets where the underlying is difficult and costly to move around, such as gold and oil. It is estimated that the global derivatives market is worth around $1.2 quadrillion, which is many times the world’s GDP.

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