Markets

A futures market was established in Osaka's rice market in Japan in the seventeenth-century.

A futures market was established in Osaka's rice market in Japan in the seventeenth-century. Tulip bulb options were traded in seventeenth-century Amsterdam. Commodity futures trading really began to take off in the nineteenth century with the Chicago Board of Trade regulating the trading of grains and other futures and options, and the London Metal Exchange dominating metal trading.

Instruments

A derivative instrument is an asset whose performance is based on (derived from) the behavior of the value of an underlying asset (usually referred to simply as the 'underlying').

Derivative instruments have become increasingly important for professional investors over the last 20 years. However, they are not just the province of professionals. Private investors can also exploit these powerful tools to either reduce risk or to go in search of high returns.

A derivative instrument is an asset whose performance is based on (derived from) the behavior of the value of an underlying asset (usually referred to simply as the 'underlying'). The most common underlyings are commodities (e.g. tea or pork bellies), shares, bonds, share indices, currencies and interest rates.

Derivatives instruments have been employed for more that two thousand years. In the Middle Ages forward contracts were traded in a kind of secondary market, particularly for wheat in Europe.