Use Investopedia or Wiki to define financial terms.
http://www.investopedia.com/terms/d/deri...
http://www.investopedia.com/terms/e/equi...
You can simplify this greatly if you just think of equity as a stock, because in the stock market, an asset's equity is measured by its stock price. So equity = stock. Got it? One down.
Derivatives: The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives have high leverage. If you don't know what leverage is, define your terms.
The most common derivative is an option and the most common option is an equity derivative or stock option.
The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. In the case of an equity option, the derivative price is determined by fluctuations in the price of the stock, but price of the derivative is accentuated by leverage of the derivative.
Futures contracts, forward contracts, options and swaps are the most common types of derivatives.
It's much easier if you tell us what it is you don't understand about the definitions.
The main derivative is an (equity) option. Equity is outright ownership whereas an option is the right to buy the equity of you so choose. This right to buy (or sell, of course) comes at a price. This price is called the option premium.
If you choose to exercise the option then you buy the equity (at a pre-agreed price, called the 'strike').
A derivative is derived from the underlying but is traded on a completely seperate market and, in fact, the derivative is much larger than the underlying market. Foe example if there are only 100 shares (equity) available in the market there may be many times that number in the derivative (option) market.
In simple words:
Equity is a stock - you may invest directly into the company and trade a company's stocks (equities)
Derivative - it is something that derive from something. It allows you invest/trade indirectly a public company or a commodity. You will find here options, futures, ETFs, and etc. One of the best example would be MSFT stock - you may trade it directly. On the other hand QQQ ETF is Nasdaq 100 derivative - you cannot trade Nasdaq 100 directly, but you can trade it indirectly via QQQ
Equity is when you are a stockholder,owner of the company. Derivative is a option and or warrant on the company stock,it gives you the right to purchase but not the obligation to purchase.Debenture is a bond of the company you the bond holder are a creditor of the company and company owes this money to you although it is not guaranteed because you are an unsecured creditor as opposed to secure creditor.
Can someone explain me please the difference between Equity and Derivatives? - Thanks.
