101 Basics

Derivatives: The High-Stakes Contracts That Run the Financial World

30 Jan 2025 • 3 min read

What You’ll Learn in This Article

By the time you finish reading, you’ll be able to:

✅ Explain what a derivative is without breaking into a cold sweat.
✅ Identify the different types of derivatives - futures, swaps, options, and credit derivatives - and what they actually do.
✅ Understand why companies, traders, and institutions use derivatives for hedging, speculation, and arbitrage.
✅ Spot the difference between over the counter (OTC) derivatives and exchange-traded derivatives (think custom-built vs. ready-made).
✅ Get a grasp on how derivatives are traded and the key documentation involved.

Sounds good? Let’s begin.