What are derivative securities?

Derivative securities are financial instruments whose value is derived from the value of an underlying asset, such as a stock, bond, commodity, or currency. These securities include options, futures, forwards, swaps, and other complex financial products. Derivatives are used by investors and traders to hedge against risk, speculate on price movements, and enhance returns. They can be highly leveraged and carry a high level of risk, but they also offer the potential for significant returns.