Derivative instruments - characteristics Sample Clauses

Derivative instruments - characteristics financial instruments whose value is derived from the value of an asset. Rather than being traded with the asset itself, market participants agree to exchange money, assets or other value in the future. Besides market, credit and liquidity risk, derivatives also carry specific risks. Derivatives are highly specialized instruments whose use requires understanding both the underlying asset and the mechanism of action of the derivative itself. The complexity of derivatives requires adequate resources for monitoring transactions, analysis of specific risks and ability to predict prices. Adverse change in the price of the underlying asset, rate or index can result in loss of an amount greater than the one invested in the derivative. Certain derivatives have the potential for an unlimited loss. There is also the risk of wrong valuation of the derivative. Very often the evaluation of derivatives is subjective. Consequently, a loss might be suffered when buying overpriced derivatives. Types of derivatives are options, futures, forwards, swaps, contracts for difference:
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