Derivative is a general term used for contracts that have their price based on the properties of an underlying asset. In particular, options are a standardized type of derivatives that give the right to buy or sell the underlying asset at a particular price. Unlike options, however, general derivatives include a large number of nonstandard features that allow them to be created even for illiquid assets such as corporate credit risk or real estate mortgages.
In the last decades, the financial industry has created and popularized a multitude of derivatives to collateralize ...
