Trader's Glossary


A derivative is a financial instrument that has no intrinsic value in and of itself; rather it derives its value from some other financial instrument, asset, index, exchange rate etc. CFDs, options, swaps, forwards and futures are a few examples of derivative contracts. The past few decades have seen the value of the derivative market increasing exponentially, with the particulars of the contracts themselves becoming ever-more complex. It has been estimated that the derivatives market could be worth as much as $1.2 quadrillion, dwarfing the annual gross world product (GWP) which, by comparison, was only around $70 trillion in 2012.