A contract whose value depends on an underlying asset such as a share, index, commodity or currency.
Futures and options are derivatives.
Related terms in Markets & investment
Bear market
A market in which prices are falling or expected to fall. A bull market is the opposite.
Bond
A loan given by an investor to a government or company, which pays interest (coupon) and returns the money on maturity.
Call money
Money lent between banks for one day. Notice money is for 2 to 14 days, and term money for 15 days to one year.
Certificate of Deposit (CD)
A tradable short-term deposit issued by banks. The minimum is Rs 5 lakh and bank CDs run from 7 days to one year.
Commercial Paper (CP)
An unsecured short-term borrowing instrument issued by companies, with a maturity of 7 days to one year.
Debenture
A debt instrument issued by a company, usually unsecured, that pays fixed interest.
Demat account
An account that holds shares and other securities in electronic form.
Dividend
The part of a company's profit paid to its shareholders.
ELSS
Equity Linked Savings Scheme. A mutual fund that invests mainly in shares and has a three-year lock-in. It gives a tax deduction …
Equity share
A unit of ownership in a company. Shareholders can vote and share in profits through dividends.