An Equity Derivative is a financial instrument whose value is based on the equity movements of the underlying asset. Equity derivatives can be used to hedge risk or to speculate on the future movement of prices.The most common type of equity derivative is a stock option, which gives the holder the right, but not obligation, to buy or sell shares of stock at a pre-determined price (the strike price) within a certain time period. Other types of equity derivatives include futures contracts and swaps.
