Derivative

In finance, a Derivative is a financial instrument derived from some other asset; rather than trade or exchange the asset itself, market participants enter into an agreement to exchange money, assets or some other value at some future date based on the underlying asset. A simple example is a futures contract: an agreement to exchange the underlying asset (or equivalent cash flows) at a future date. The exact terms of the derivative (the payments between the counterparties) depend on, but may or may not exactly correspond to, the behaviour or performance of the underlying asset. Typically futures can be purchased for [wheat], corn, soybeans, and more recently ethanol. Though related to the price of corn, ethanol can also be made with other grains. Futures on livestock have been traded since the times of the ancient greeks.