Q&A: Derivatives explained

What exactly are derivatives? A derivative is any instrument where the price is derived from another asset. That is where the word derivative comes from. Originally these would have been, for example, farmers selling agricultural commodities and wanting to get a guaranteed price for their product in the market. They would sell it at the beginning of the year to actually deliver it at harvest time. In practice today there are two major types of derivatives, futures and options. Talk us through futures If I was an oil producer and I have a million barrels of oil I want to sell, I might...