Explore BrainMass

Explore BrainMass

    Use of derivatives: why or why not?

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What is the definition of a derivative and give an example. What is one way you would use derivatives?

    © BrainMass Inc. brainmass.com December 15, 2022, 7:44 pm ad1c9bdddf

    Solution Preview

    The definition of a derivative: " is a financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency.

    Examples of derivatives include futures and options.

    They can be used for protection against downside risk, but they also can be used to generate income. Buying and selling options is a risky and fast ...

    Solution Summary

    The solution explains the general definition of a derivative following by an example of using a covered call to demonstrate the use.