What is an 'Equity Derivative'
An equity derivative is a derivative instrument with underlying assets based on equity securities. An equity derivative's value will fluctuate with changes in its underlying asset's equity, which is usually measured by share price.
BREAKING DOWN 'Equity Derivative'
Investors can use equity derivatives to hedge the risk associated with taking a position in stock by setting limits to the losses incurred by either a short or long position in a company's shares. The investor receives this insurance by paying the cost of the derivative contract, which is referred to as a premium. If an investor purchases a stock, he or she can protect against a loss in share value by purchasing a put option. On the other hand, if the investor has shorted shares, he or she can hedge against a gain in share price by purchasing a call option.
Options are the most common equity derivatives because they directly grant the holder the right to buy or sell equity at a predetermined value. More complex equity derivatives include equity index swaps, convertible bonds or stock index futures.

Underlying Asset
A term used in derivatives trading, such as with options. A derivative ... 
Underlying Option Security
An underlying option security is the financial instrument on ... 
Derivative
A security with a price that is dependent upon or derived from ... 
Exchange Traded Derivative
A financial instrument whose value is based on the value of another ... 
Derivative Product Company  DPC
A specialpurpose entity created to be a counterparty to financial ... 
Underlying Security
The security on which a derivative derives its value. For example, ...

Professionals
What is a Derivative?
CFA Level 1  What is a Derivative?. Learn the basicas of derivative instruments. Covers various types of options, swaps and differentiates exchange and overthecounter trades. 
Investing
What Is A Derivative?
A derivative is a security whose price is dependent upon or derived from one or more underlying assets. Learn more on how investors can use this financial instrument in their trading strategies. 
Options & Futures
Derivatives 101
A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the assetâ€™s price movement with another party. 
Options & Futures
4 Equity Derivatives And How They Work
Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself. 
Fundamental Analysis
Derivatives 101
Learn how to use this type of investment as an alternative way to participate in the market. 
Professionals
Criticisms of Derivatives
CFA Level 1  Criticisms of Derivatives. Discusses types of criticisms facing derivatives. Offers contrasting opinions on the use of derivatives and their role in the market place. 
Professionals
Purposes and Benefits of Derivatives
CFA Level 1  Purposes and Benefits of Derivatives. Learn the purposes and benefits of derivatives. Discusses how derivatives can yield profits and be used as a tool for risk management. 
Investing Basics
Warrants
Learn more about this derivative security. 
Professionals
Derivatives
CFA Level 1: Section 15  Derivatives 
Products and Investments
SEC Derivatives Rule May Limit Diversification
The SEC has proposed rules that will limit the use of derivatives by fund managers. Critics believe the rules will impede funds' ability to diversify.

How big is the derivatives market?
Examine the potential size of the total derivatives market, and learn how different calculations can reduce the estimate ... Read Answer >> 
What expiry months are typically available for derivatives?
Discover more about the derivatives market and learn about the varying expiration months for derivatives in different financial ... Read Answer >> 
What does it mean to be long or short a derivative?
Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ... Read Answer >> 
Can mutual funds invest in derivatives?
Find out about mutual fund investment options, and understand whether mutual funds are permitted to include investments in ... Read Answer >> 
What is a derivative?
A derivative is a contract between two or more parties whose value is based on an agreedupon underlying financial asset, ... Read Answer >> 
What is the difference between derivatives and options?
Learn how options are one type of derivative and how equity options derive their value from a stock, and understand other ... Read Answer >>