Financial derivatives, or contingent claims, are contracts that provide payoffs that depend on the value of an underlying asset. They are used extensively for hedging as well as for speculation. Derivatives are traded on both organized exchanges and over the counter, and have a surprisingly long history.

Typical derivatives contracts that are widely traded today include

• futures
• forwards
• swaps
• options

These contracts offer relatively simple and intuitive payoffs. More exotic derivatives are also available, offering complicated payoff structures.

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Phneomeanl breakdown of the topic, you should write for me too!