This Overview is a guide to the Banking & Finance content within the Sector specific derivatives subtopic, with links to appropriate materials.
Financial derivatives are contracts entered into between two parties, or purchased over an exchange, and which take their value from another instrument. They have a wide variety of uses and allow investors flexible and cost effective access to the movements of shares, bonds and instruments which are not available through direct investment in that particular asset class.
The flexibility of derivatives allows them to be used for a wide range of purposes. The Practice Notes in this sub-topic explain some of these different types of derivatives.
For more information on the different types of derivatives, see Practice Note: Types of derivatives.
A swap describes a wide variety of derivative transactions. Since their inception in the 1980s, swaps have evolved into a worldwide market encompassing trillions of pounds worldwide in notional value. They are subject to different regulations and laws depending on the market in which they are traded. Swaps are generally documented under the International Swaps and Derivatives Association, Inc. (ISDA) framework.
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