A derivative is a financial instrument (contract) that derives its performance from the performance of an underlying asset.

A forward contract is a private agreement that obligates one party to buy and the other party to sell a specific quantity of an underlying asset, at a set price, at a future date

A future contract is a specialized version of a forward contract that has been standardized and that traders on a futures exchange.

Guarantee provided by the exchange through the clearinghouse

The owner has the right but not the obligation to conduct a transaction

Right and obligations are not equal only in option contract, so the long position need to pay option premium

is an agreement between two parties in which one party, the buyer, agrees to buy from the other party, the seller, an underlying asset at a future date at a price established at the start

is derived in which the payoffs occur if a specific event happens

a decentralized market where buy and sell orders initiated from various locations are matched through a communications network

No payments will be made at the inception of a forward contract. So both parties of a forward contract is exposed to potential default risk.

deliver an actual asset, has storage cost, mostly used in commodity forward

the party that has a position with negative value is obligated to pay that amount to the other party, mostly used in financial forward

with an expiration date equal to the time remaining on the original contract

settle in cash, but no actual loan is made at the settlement date

A future contract is an agreement that obligates one party to buy and the other party to sell a specific quantity of an underlying asset, at a set price, at a future date.

Futures contracts specify the quality and quantity of goods that can be delivered, the delivery time and the manner of delivery.

Each exchange has a clearing house which is a third participant guaranteeing to each party that is ensures against the other party defaulting.

A clearinghouse acts as the counterparty to each participant.
The clearinghouse is the buyer to the seller and the seller to the buyer by crediting gains to the winners and charging losses to the losers.

Each participants are allowed by the clearinghouse to reverse their positions in the future.

Limit on the extent of price movement from the settlement price of the previous trading day.

If traders wish to trade at price outside these limit --- no trades will take place. --- the settlement price will be reported upper or lower price limits

when the markets hits these limits (limit up or limit down) and trading stops.

A swap contract obligates two parties to change a series of cash flows on periodic settlement dates over a certain time period.

No payment required by either party at initiation except the principle values exchanged in currency swaps.

The parties involved in any swap agreement are called the counterparites

The counterparty that makes fixed-rage interest payment in exchange for variable interest rate.

The counterparty that makes variable-rate interest payment in exchange for fixed payment.

The seller or short position in an options contract is sometimes referred to as the writer of the option

Strike price (X) represents the exercise price specified in the contract.

is essentially an insurance contract for the reference, the reference obligation is the fixed income security on which the swap is written-usually a bond but potentially also a loan.

Protection buyer receives a payment from the protection seller is default occurs on the reference entity.

the underlying is the credit (yield) spread on a bond, which is the difference between the bond's yield and the yield on a benchmark default-free bond