derivative contract


derivative contract
A derivative, derivatives or derivative contracts are financial instruments whose value derives from the value and characteristics of underlying products. The underlying assets (often referred to as the "underlying" or "underlier") are extremely varied and range from commodities, currencies and indices to individual shares. The main feature of a derivative is that it allows the user to take an exposure in relation to the underlying asset without actually requiring a direct investment in it. Derivatives include futures, options and swaps.
For UK corporation tax purposes, derivative contracts are defined as contracts that satisfy the conditions contained in Schedule 26 to the Finance Act 2002.
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USA
A contract that operates and is valued by reference to the value or performance of an underlying asset, entity, rate, index or instrument. Underlying assets range from commodities, currencies, debt obligations and indices to individual equity shares and baskets of equities. Derivatives allow the user to take on exposure to an underlying asset without actually requiring a direct investment in the asset. Derivatives include futures, options and swaps.
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Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.