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Definition: Financial derivative
Category: External debt - IMF
Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator or commodity, and through which specific financial risks can be traded in financial markets in their own right. The value of a financial derivative derives from the price of an underlying item, such as an asset or index. Unlike debt instruments, no principal amount is advanced to be repaid, and no investment income accrues. Financial derivatives are used for a number of purposes including risk management, hedging, arbitrage between markets, and speculation. Transactions in financial derivatives should be treated as separate transactions rather than integral parts of the value of underlying transactions to which they may be linked. http://ec.europa.eu/eurostat/ramon/statmanuals/files/external_debt_guide_2003_EN.pdf#page=255
Source:
International Monetary Fund (IMF), "External Debt Statistics: Guide for Compilers and Users; Appendix III. Glossary of External Debt Terms", Washington D.C., 2003
International Monetary Fund (IMF), "External Debt Statistics: Guide for Compilers and Users; Appendix III. Glossary of External Debt Terms", Washington D.C., 2003
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