derivative

noun
de·​riv·​a·​tive | \ di-ˈri-və-tiv \

Definition of derivative

 (Entry 1 of 2)

1 linguistics : a word formed from another word or base : a word formed by derivation "pointy," "pointed," and other derivatives of "point"
2 : something derived … the sonata form (itself a derivative of opera) …— Kingsley Martin the name "Mia" is a derivative of "Maria"
3 mathematics : the limit of the ratio of the change in a function to the corresponding change in its independent variable as the latter change approaches zero

4 chemistry

a : a chemical substance related structurally to another substance and theoretically derivable from it
b : a substance that can be made from another substance Petroleum is a derivative of coal tar. soybean derivatives
5 : a contract or security (see security sense 3) that derives its value from that of an underlying asset (such as another security) or from the value of a rate (as of interest or currency exchange) or index (see index entry 1 sense 1b) of asset value (such as a stock index)

derivative

adjective

Definition of derivative (Entry 2 of 2)

1 linguistics : formed from another word or base : formed by derivation a derivative word
2 : having parts that originate from another source : made up of or marked by derived elements a derivative philosophy
3 : lacking originality : banal a derivative performance a film using a derivative plot device

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Other Words from derivative

Adjective

derivatively adverb
derivativeness noun

Synonyms & Antonyms for derivative

Synonyms: Noun

by-product, derivate, derivation, offshoot, outgrowth, spin-off

Synonyms: Adjective

secondary, secondhand

Antonyms: Noun

origin, root, source

Antonyms: Adjective

basic, original

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Examples of derivative in a Sentence

Noun

The word “childish” is a derivative of “child.” Tofu is one of many soybean derivatives. Petroleum is a derivative of coal tar.

Adjective

A number of critics found the film derivative and predictable. His style seems too derivative of Hemingway.
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Recent Examples on the Web: Noun

With both volatility and the correlation between different investments rising, those quantitative strategies are exacerbating selloffs, according to equity and derivatives strategists at BNP Paribas . Mike Bird, WSJ, "December Has Typically Been a Great Month for Stocks—Until Now," 9 Dec. 2018 Though its derivatives have been used for everything from textiles to medicine, hemp is currently everywhere in the form of a trendy ingredient called cannabidiol (CBD). Angela Chen, The Verge, "Growing hemp is about to be legal for the first time in nearly a century," 30 Nov. 2018 The Sears transaction spotlights the potential for problems when derivatives and bankruptcy intersect, critics say. Andrew Scurria, WSJ, "Sears Bankruptcy Battle Tests Swaps Market," 19 Dec. 2018 Yost added that hospitals may have identified more people because of fentanyl and the fentanyl derivatives that have caused critical overdoses. Terry Demio, Cincinnati.com, "Medicaid spending on opioid treatment soars in Ohio, auditor reports," 26 June 2018 Bottom line: The vitamin A derivatives known as retinol, tretinoin, adapalene, and tazarotene can protect the skin from sun damage. Dr. Leslie Baumann, miamiherald, "What you need to know about 'hazardous' sunscreen ingredients | Miami Herald," 27 Apr. 2018 Until the Volcker Rule, traders inside the banks were also using the same derivatives to make speculative bets on the markets. Emily Flitter, New York Times, "Bankers Hate the Volcker Rule. Now, It Could Be Watered Down.," 21 May 2018 Traders often use these derivatives to hedge against market fluctuations. Fortune, "What Are Backwardation and Contango? Here's What You Should Know," 10 Feb. 2018 There are different formulations, different types of retinol and retinol derivatives, different concentrations, different fragrances. Cheryl Wischhover, Vox, "The “best” lipstick probably won’t change your life — but the search for it can," 12 Dec. 2018

Recent Examples on the Web: Adjective

Pros recommend pairing an antioxidant and skin brightener (like the vitamin B3 derivative niacinamide) with your sunscreen. Nicole Catanese, Marie Claire, "5 Ways to Supercharge Your Skincare Products," 10 Dec. 2018 Courts judge fair use partly based on how your derivative art affects the original work’s value. Adi Robertson, The Verge, "How to use Instagram like an appropriation artist," 18 Oct. 2018 Retinoic acid Good for: Stimulating collagen and cell turnover, exfoliation Retinoic acid, also called retinol or retinoid, is a vitamin A derivative that directly helps increase collagen production to stimulate cell turnover. Talia Abbas, SELF, "How to Pick the Right Skin-Care Acid for Your Concerns," 9 Oct. 2018 For both types there can be derivative contracts that protect investors against default. Paul J. Davies, WSJ, "How Deutsche Bank is Dealing With its Big Weakness," 21 Nov. 2018 Additionally, asylees may apply for a Social Security card, and request spouses and children listed on their asylum application to receive derivative asylum status. Erin Coulehan, Teen Vogue, "What Asylum Means, and Why People Seek It," 13 Nov. 2018 The gel combines sodium lactate (a lactic acid derivative) with niacinamide and hyaluronic acid, to provide exfoliation with a ton of hydration. Hallie Gould, The Seattle Times, "6 top products for smooth summer skin," 26 July 2018 Goldman Sachs and Morgan Stanley, for example, just cleared their supplementary leverage ratios—a measure that includes lending and derivative exposure relative to their capital levels. Telis Demos, WSJ, "Big Banks Clear Fed’s Stress Tests," 21 June 2018 Investors can also use derivative products like futures and options to take positions on Xiaomi’s future share price. Joanne Chiu, WSJ, "Xiaomi Shares Slip Ahead of Official Debut," 6 July 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'derivative.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of derivative

Noun

15th century, in the meaning defined at sense 1

Adjective

circa 1530, in the meaning defined at sense 1

History and Etymology for derivative

Noun

see derive

Adjective

see derive

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Last Updated

6 Feb 2019

Look-up Popularity

Time Traveler for derivative

The first known use of derivative was in the 15th century

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More Definitions for derivative

derivative

noun

Financial Definition of derivative

What It Is

A derivative is a financial contract with a value that is derived from an underlying asset. Derivatives have no direct value in and of themselves -- their value is based on the expected future price movements of their underlying asset.

How It Works

Derivatives are often used as an instrument to hedge risk for one party of a contract, while offering the potential for high returns for the other party. Derivatives have been created to mitigate a remarkable number of risks: fluctuations in stock, bond, commodity, and index prices; changes in foreign exchange rates; changes in interest rates; and weather events, to name a few.

One of the most commonly used derivatives is the option. Let's look at an example:

Say Company XYZ is involved in the production of pre-packaged foods. They are a large consumer of flour and other commodities, which are subject to volatile price movements.

In order for the company to assure any kind of consistency with their product and meet their bottom-line objectives, they need to be able to purchase commodities at a predictable and market-friendly rate.  In order to do this, company XYZ would enter into an options contract with farmers or wheat producers to buy a certain amount of their crop at a certain price during an agreed upon period of time. If the price of wheat, for whatever reason, goes above the threshold, then Company XYZ can exercise the option and purchase the asset at the strike price. Company XYZ pays a premium for this privilege, but receives protection in return for one of their most important input costs. If XYZ decides not to exercise its option, the producer is free to sell the asset at market value to any buyer. In the end, the partnership acts as a win-win for both parties: Company XYZ is guaranteed a competitive price for the commodity, while the producer is assured of a fair value for its goods.

In this example, the value of the option is "derived" from an underlying asset; in this case, a certain number of bushels of wheat.

Other common derivatives include futures, forwards and swaps.

Why It Matters

As often is the case in trading, the more risk you undertake the more reward you stand to gain. Derivatives can be used on both sides of the equation, to either reduce risk or assume risk with the possibility of a commensurate reward.

This is where derivatives have received such notoriety as of late: in the dark art of speculating through derivatives. Speculators who enter into a derivative contract are essentially betting that the future price of the asset will be substantially different from the expected price held by the other member of the contract. They operate under the assumption that the party seeking insurance has it wrong in regard to the future market price, and look to profit from the error.

Contrary to popular opinion, though, derivatives are not inherently bad. In fact, they are a necessity for many companies to ensure profits in volatile markets or provide mitigated risk for everyday investors looking for investment insurance.

Source: Investing Answers

derivative

noun

English Language Learners Definition of derivative

 (Entry 1 of 2)

: a word formed from another word
: something that comes from something else : a substance that is made from another substance

derivative

adjective

English Language Learners Definition of derivative (Entry 2 of 2)

usually disapproving : made up of parts from something else : not new or original
: formed from another word

derivative

noun
de·​riv·​a·​tive | \ di-ˈri-və-tiv \

Kids Definition of derivative

 (Entry 1 of 2)

1 : a word formed from an earlier word or root The word “Childhood” is a derivative of “child.”
2 : something that is formed from something else Gasoline is a derivative of petroleum.

derivative

adjective

Kids Definition of derivative (Entry 2 of 2)

: formed from something else a derivative product

Other Words from derivative

derivatively adverb

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derivative

adjective
de·​riv·​a·​tive | \ di-ˈriv-ət-iv \

Medical Definition of derivative

 (Entry 1 of 2)

1 : formed by derivation
2 : made up of or marked by derived elements

derivative

noun

Medical Definition of derivative (Entry 2 of 2)

1 : something that is obtained from, grows out of, or results from an earlier or more fundamental state or condition
2a : a chemical substance related structurally to another substance and theoretically derivable from it
b : a substance that can be made from another substance

derivative

noun
de·​riv·​a·​tive | \ də-ˈri-və-tiv \

Legal Definition of derivative

 (Entry 1 of 2)

: a contract or security that derives its value from that of an underlying asset (as another security) or from the value of a rate (as of interest or currency exchange) or index of asset value (as a stock index)

Note: Derivatives often take the form of customized contracts transacted outside of security exchanges, while other contracts, such as standard index options and futures, are openly traded on such exchanges. Derivatives often involve a forward contract.

derivative

adjective

Legal Definition of derivative (Entry 2 of 2)

1 : arising out of or dependent on the existence of something else — compare direct
2 : of, relating to, or being a derivative a derivative transaction

Other Words from derivative

derivatively adverb

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Comments on derivative

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