derivatives

the risk that won't go away 1994 Fortune

That possibility must be entertained because derivatives have grown with stunning speed into an enormous, pervasive, and controversial financial force. Derivatives are contracts whose value is derived - the key word - from the value of some underlying asset, such as currencies, equities, or commodities; from an indicator like interest rates; or from a stock-market or other index. The derivative instruments that result - variously called swaps, forwards, futures, puts, calls, swaptions, caps, floors, collars, captions, floortions, spreadtions, look-backs, and other neverland names - keep bursting into the news, as they did recently when the Federal Reserve raised interest rates and share prices sank, costing some traders of derivatives huge amounts that in some cases surely ran into many millions.