Forwards, futures, swaps, options, hybrids (such as swaptions and options on futures) and a category “other” (credit derivatives, weather derivatives, etc) make up the derivative markets. The word is drawn from “derive” and means that the derivative instrument cannot exist on its own. It is closely related to “something” and this something is usually a spot (or “cash”) market instrument called the underlying instrument. A spot deal is a deal done now (T+0 days) for settlement now. “Now” means the earliest date dictated by market convention.

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