The Layman's Financial Crisis Glossary
Derivatives are a way of investing in a particular product or security without having to own it. The value can depend on anything from the price of coffee to interest rates or what the weather is like.
Derivatives can be used as insurance to limit the risk of a particular investment.
Credit derivatives are based on the risk of borrowers defaulting on their loans, such as mortgages.
In a business, equity is how much all of the shares put together are worth.
In a house, your equity is the amount your house is worth minus the amount of mortgage debt that is outstanding on it.
Fundamentals determine a company, currency or security’s value. A company’s fundamentals include its assets, debt, revenue, earnings and growth.
A futures contract is an agreement to buy or sell a commodity at a predetermined date and price. It could be used to hedge or to speculate on the price of the commodity.