Derivative

1.

Abbreviation for derivative financial instrument.

2.

Maths.

A derivative function describes the rate of change of the underlying function, with respect to changes in one of the variables in the underlying function.

• The first derivative describes the slope of the function curve at a given point on the curve.
• The second derivative describes the rate of change of the slope. In other words the degree of curvature, at a given point.

Most of the 'Greek letters' in options analysis are the first derivative of the option value, as the related value driver changes.

See also

• Delta
• Derivative instrument
• Differentiation
• Embedded derivative
• Greeks