What is the difference between a financial derivative and a financial security?

What is the difference between a financial derivative and a financial security Introduction: The Intricate World of Finance Hello everyone, and welcome to today's video on the intriguing realm of finance. In this discussion, we'll be exploring the contrasting aspects of financial derivatives and financial securities, two fundamental components of the financial landscape. Defining Financial Derivatives Let's begin by defining financial derivatives. In essence, a derivative is a contract between two parties that derives its value from an underlying asset. This asset can be anything from stocks and bonds to commodities or even interest rates. The derivative itself, however, doesn't possess any intrinsic value. Instead, it derives its worth from the fluctuations in the underlying asset's price. Types of Financial Derivatives There are several types of financial derivatives, each serving a unique purpose. For instance, options provide the buyer with the right, but not the obligation, to buy or sell the underlying asset at a predetermined price within a specified timeframe. Futures, on the other hand, are contracts that obligate the buyer and seller to transact the underlying asset at a predetermined price and date. Other derivatives include swaps, forwards, and more.