PRIMARY DERIVATIVE Meaning and
Definition
-
Primary derivative refers to a financial instrument that derives its value from an underlying asset, such as a stock, bond, commodity, or currency. It is a type of derivative that directly derives its value from the performance of the underlying asset. This means that any changes in the price or value of the underlying asset directly impact the value of the primary derivative.
Primary derivatives are commonly used by investors, traders, and speculators to gain exposure to the underlying asset without actually owning it. They offer a way to profit from the price movements of the underlying asset, whether it is increasing or decreasing in value.
Examples of primary derivatives include options, futures contracts, and swaps. Options give the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined price within a specific time period. Futures contracts, on the other hand, obligate the buyer to purchase the underlying asset at a future date and price, while the seller is obligated to deliver it. Swaps, on the other hand, involve the exchange of cash flows based on the performance of the underlying asset.
Primary derivatives can be highly leveraged, meaning that a small price movement in the underlying asset can result in a significantly larger profit or loss for the derivative holder. They are often used for hedging purposes, managing risks, or making speculative investments. However, they also carry a higher level of risk and require a good understanding of the underlying asset and market conditions.
Common Misspellings for PRIMARY DERIVATIVE
- orimary derivative
- lrimary derivative
- 0rimary derivative
- peimary derivative
- pdimary derivative
- pfimary derivative
- ptimary derivative
- p5imary derivative
- p4imary derivative
- prumary derivative
- prjmary derivative
- prkmary derivative
- promary derivative
- pr9mary derivative
- pr8mary derivative
- prinary derivative
- prikary derivative
- prijary derivative
- primzry derivative
- primsry derivative
Etymology of PRIMARY DERIVATIVE
The term "primary derivative" is not a commonly used phrase in the English language, and thus, it does not have a formal etymology. However, the etymology of its constituent words can help shed some light on its meaning.
1. Primary: The word "primary" originated from the Latin word "primarius", meaning "first, chief, principal". It entered English in the early 15th century and has retained a similar meaning ever since. "Primary" refers to something that is of first or highest importance or that comes before anything else.
2. Derivative: In this context, "derivative" is likely derived from its usage as a mathematical term. The English word "derivative" comes from the Latin word "derivare", meaning "to lead or draw off from". It refers to a derivative value or quantity obtained from a function, formula, or equation.
Infographic
Add the infographic to your website:
