Tag Archives: Investing

In terms of finance, what is a derivative?

Money

Derivative: It’s a confusing topic, which is why it was no surprise to see a flurry of activity on a city clerk listserv the other day when one of the clerks received a Notice of Municipal Derivatives Settlement. The answers she got were as foggy as the term.

So, what exactly is a derivative? We decided to simplify it for you using a mnemonic devise using the word “derivative.”

D – Derivative: A Derivative is a financial contract that derives its value based on the performance of another entity.

E – Entity: Entities determine the value of derivative, such as an asset, index, or interest rate. Read more >

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