Derivative Instrument or Product

(1) A contract or convertible security that changes in value in concert with and/or obtains much of its value from price movements in a related or underlying security, future, or other instrument or index. (2) A security or contract, such as an option, forward, future, swap, warrant, or a debt instrument with one or more options, forwards, swaps, or warrants embedded in it or attached to it. The value of the instrument is determined in whole or in part by the price of one or more underlying instruments or markets. Also called Contingent Claim. (3) An instrument created by decomposing the return of a related underlying instrument or index. Examples include Americus Trust and Collateralized Mortgage Obligation (CMO) component instruments. (4) Occasionally limited to zero net supply contracts. This restrictive definition excludes warrants, convertibles and CMO components. (5) In the financial press, any product that loses money.

Glossary * D