Derivative

The problem is that very few people know what derivatives are. To keep things very simple, I explain derivatives by using the example of an orange and orange juice. Orange juice is a derivative of an orange—just like gasoline is a derivative of oil, or an egg is a derivative of a chicken. It's that simple: If you buy a house, a mortgage is a derivative oif you and the house you buy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

A broad definition of a derivative is: a substance that can be made from another substance. For example, orange juice is a derivative of an orange. One definition of a financial derivative is: having a value from an underlying variable asset. By way of example, a share of common stock is a derivative of an existing company, such as Apple Computers. Simply said, when you buy a share of Apple, you are buying a derivative of Apple the company. And when you buy a share of a mutual fund, you are buying a derivative of that fund, which is a derivative of stocks—a derivative of a derivative.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich