Derivative

DERIVATIVE

AS- 30/31/32

A derivative is

-          a financial instrument or other contract

-          with all three of the following characteristics:

a)      its value changes in response to the change in an underlying variable

(such as a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable )

b)      it requires no initial net investment

( or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors); and

c)      it is settled at a future date.

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