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Derivative

A financial instrument that derives its value from an underlying asset (equity, bon or commodity) or an underlying index. A weather derivative is linked to an index derived from a weather variable such as temperature and addresses the volume risk of weather-sensitive firms. Financial derivatives are used as a tool to manage financial price risks. They consist of: forward contracts, tailor-made contracts to eliminate the risk of some form of price uncertainty; futures contracts, exchangetraded standard forward contracts; swaps, a package of forward contracts simultaneously arranged; options, financial markets equivalent of an insurance policy. These contracts allow entities to hedge against future price changes or take positions to offset the impact of unwelcome price changes or other specified conditions.

Derivative suit

A lawsuit brought by one or more shareholders on behalf of the corporation and seeks to enforce a right of action belonging to the corporation. Any recovery in a derivative suit is paid to the corporation and the individual shareholders who prosecute the derivative suit are benefited only indirectly by reason of the corporation benefiting. The claims asserted by the plaintiff and the defenses available to the defendants in a derivative suit are generally the same as if the corporation itself was prosecuting the claim.