Derivative

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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