Derivatives are financial instruments whose value changes 
in response to the changes in underlying variables. The 
main types of derivatives are futures, forwards, options, 
and swaps.

The main use of derivatives is to reduce risk for one 
party. The diverse range of potential underlying assets and 
pay-off alternatives leads to a huge range of derivatives 
contracts available to be traded in the market. Derivatives 
can be based on different types of assets such as 
commodities, equities (stocks), bonds, interest rates, 
exchange rates, or indexes (such as a stock market index, 
consumer price index (CPI) — see inflation derivatives — or 
even an index of weather conditions, or other derivatives). 
Their performance can determine both the amount and the 
timing of the pay-offs.