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(FINANCE) a financial instrument whose value is tied to [something else]; for example, * a futures contract (future) * an option * a swap In each of these examples, the value of the derivative is related in some way to the price of [something else]. When the market price of (say) an ounce of gold goes from $1000/oz to $1050/oz, the return to the owner of 1 oz. of actual gold is 5%. But for the owner of a call option or a future, the return is much, much greater than that. A derivative can be used to multiply risk AND potential profits to speculators; but it can be used for the [counterparty] to minimize risk by locking in prices, or by hedging against risk.
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