Clearing and Settlement of Derivatives

1

The development of

futures and options

and OTC derivatives

What are derivatives?

‘Derivatives’ is a generic term used to describe a wide range of products

that derive their price or have their value linked in some way to some

other product.

As a result the derivative product can be used as a synthetic version

of that other product, often referred to as the underlying, and this

enables many different strategies to be developed, including hedging

and speculative ones. For instance if we think the price of say BP

shares is likely to move sharply upwards but it would equally be pos-

sible that something might happen to ...