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

What’s more, unlike most other deep-sea fish, the stoplight loosejaw is also one of few fish able to see long red wavelengths by producing a derivative of chlorophyll, the light-converting pigment typically found in plants. Katherine J. Wu, Smithsonian, "Why Bioluminescence Evolved to Be Red Light, and Blue," 26 June 2018 Of the 38 new opioids detected since 2009, 28 of those have been fentanyl derivatives. Rory Smith, CNN, "Rising cocaine purity and availability fueling addictions in Europe," 7 June 2018 This is a shift from the trend of buying of bullish options for tech in the past, said Tom Holm, vice president of equity derivatives trading at Credit Suisse Group AG . Gunjan Banerji, WSJ, "Investors Seek Protection From Market’s Biggest Winners," 2 July 2018 In 2017 Blackstone bought $333m-worth of credit derivatives on Hovnanian, an American construction firm. The Economist, "A bondholder finds a sneaky way to trigger insurance against default," 3 May 2018 The prices of guaranteeing baskets of high-yield and investment-grade corporate bonds against default in the credit derivatives market has been rising this year, and returns on both the classes of debt are negative. Claire Boston, Bloomberg.com, "BlackRock, BNP Pivot to Mortgage Bonds as Corporates Fade," 3 May 2018 And that's been followed by an onslaught of fentanyl and its derivatives,which are tainting drug supplies raising death counts. Terry Demio, Cincinnati.com, "Ohio to give nearly $3 million to tech business making abuse-resistant opioid," 10 July 2018 The firm had previously gained market approval in the United Kingdom for another cannabis derivative, for treatment of multiple sclerosis. Lizzie Johnson, SFChronicle.com, "Berkeley boy was ‘Patient X’ in first FDA-approved medicine derived from marijuana," 8 July 2018 So is the role of derivatives, the increasing complexity and interconnectedness of the financial system, and deregulation through the 1990s, culminating in the repeal of Glass-Steagall. Jon Talton, The Seattle Times, "How bubbles and risk came together to cause the panic 10 years ago," 26 June 2018

Recent Examples on the Web: Adjective

Thurber makes that trickery explicit by setting one action scene in a fun house hall of mirrors, a derivative trompe l’oeil conceit of which the filmmakers prove far too enamored. Justin Chang, latimes.com, "Dwayne Johnson scales the heights in the thrillingly dumb 'Skyscraper'," 11 July 2018 Instead wealthy traders used their balance sheets to manipulate tulip futures and derivative contracts. Andy Kessler, WSJ, "Look Out, Bitcoin Has Lost Its Tether," 1 July 2018 The expositional fat of Marsha Norman’s book has been burned away, leaving us more opportunity to appreciate the always lively (if unmistakably derivative) score by Brenda Russell, Allee Willis and Stephen Bray. Charles Mcnulty, latimes.com, "'The Color Purple' national tour turns down the wattage — and burns a little less brightly," 30 May 2018 And where do the most original, unexpected, and non-derivative ideas come from? refinery29.com, "Why Fashion People Love Cult Film Grey Gardens," 3 July 2018 So Messi and Ronaldo head home, taking their rivalry and the endless and derivative conversation about their legacies with them. Brian Straus, SI.com, "The World Cup Will Be Just Fine Without the Exhausting Messi vs. Ronaldo Debate," 30 June 2018 Equifax had a policy prohibiting trading derivative securities, the regulator said. Allison Prang, WSJ, "Former Equifax Manager Charged With Insider Trading," 28 June 2018 She was also required to take a purified protein derivative (PPD) skin test for TB. Libby Solomon, baltimoresun.com, "Government sues Towson home care franchise alleging ADA violation," 28 June 2018 Bitcoin’s decline has also been followed in near-lockstep by the hundreds derivative cryptocurrencies and blockchain tokens, including Ethereum and Litecoin. David Z. Morris, Fortune, "Bitcoin Hits New 2018 Low Amid Shaken Investor Confidence," 24 June 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

30 Aug 2018

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)

: 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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