Derivative contract

Derivative contract,

Definition of Derivative contract:

  1. Contract based on (derived from) but independent of another contract, and involving a party not associated with the original (underlying) contract. For example, a juice packagers contract to purchase orange juice (orange derivative) from a juice manufacturer is a derivative contract and has nothing to do with the manufacturers contract for purchase of oranges from an orange grower, although the price of juice is tied to the price of oranges. Similarly, a contract based on the price of certain shares has nothing to do with the purchase of the shares although their prices are tied. See also derivative security.

Meaning of Derivative contract & Derivative contract Definition