Derivatives (2024)

A derivative is a financial contract whose value is derived from the performance of underlying market factors, such as interest rates, currency exchange rates, and commodity, credit, and equity prices.

Derivative transactions include an assortment of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations thereof.

Each quarter, based on information from the Reports of Condition and Income (call reports) filed by all insured U.S. commercial banks and trust companies as well as other published financial data, the OCC prepares the Quarterly Report on Bank Derivatives Activities. That report describes what the call report information discloses about banks' derivative activities.

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Risk Management of Financial Derivatives (Comptroller's Handbook, January 1997)
Responses to requests for a transition period under section 716(f) of the Dodd-Frank Act (June 11, 2013)
Credit Derivatives – Guidelines for National Banks (OCC 1996-43, August 1996); Risk Management of Financial Derivatives (BC 277, November 1993)
Covers supervisory guidance on issues related to bank participation in the developing market for credit derivatives
FAS 133 Accounting for Derivatives (OCC 1999-1, January 1999); Interim Guidance
Covers the requirement to record derivatives on the balance sheet as assets or liabilities at their fair value
Risk Management of Financial Derivatives and Bank Trading Activities (OCC 1999-2, January 1999, Supplemental Guidance)
Summarizes key lessons learned and fundamental control issues reaffirmed by financial institutions' experience since mid-1997

Comptroller Speeches

Federal Deposit Insurance Corporation's Board of Directors (PDF) (May 11, 2010)
Comptroller discusses a proposed rule on bank securitizations.
Institute of International Bankers (March 1, 2010)
Comptroller identifies the central challenge for bank regulators over the coming year to be striking the right balance between capital and credit availability.
Institute of International Bankers (March 3, 2008)
Comptroller discusses efforts to improve bank and regulatory practices pertaining to collateralized debt obligations and credit default swaps.
Global Association of Risk Professionals (February 27, 2008)
Comptroller discusses credit market disruptions involving asset-backed securities, tranches, credit default swaps, and credit rating agencies.
New York Bankers Association (November 10, 2006)
Comptroller tells bankers that managing risk in derivatives markets is essential to maintain public confidence in nation's financial institutions.

Related News and Issuances

Date	ID	Title
12/13/2023	NR 2023-138	OCC Reports Third Quarter 2023 Bank Trading Revenue
09/14/2023	NR 2023-104	OCC Reports Second Quarter 2023 Bank Trading Revenue
06/15/2023	NR 2023-62	OCC Reports First Quarter 2023 Bank Trading Revenue

FAQs

How to learn derivatives easily? ›

Constant Rule and Power Rule

If f(x) = c, then f '(x) = 0.
If f(x) = x, then f '(x) = 1.
If f(x) = x², then f '(x) = 2x.
If f(x) = x³, then f '(x) = 3x. ...
If f(x) = x⁴, then f '(x) = 4x.

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How long does it take to learn derivatives? ›

Grasping fundamental concepts like limits, derivatives, and integrals takes about six months to a year of regular study and practice. Strong algebra and trigonometry skills and high motivation can speed up this process.

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How to understand derivatives on Reddit? ›

The derivative is the instantaneous rate of a change. If you are traveling in a car the derivative of your distance with respect to time is your velocity. Miles per hour or kilometers per hour is your rate of change. The value of the speed on the speedometer is the rate of change right now.

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How to learn derivations easily? ›

Chunking: Divide the derivation into smaller chunks and focus on memorizing one chunk at a time. Once you have memorized each chunk, try to connect them together. 4. Teach Someone: Teaching someone else can be an effective way to reinforce your own understanding and memory of the derivation.

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How hard is calculus? ›

Calculus is widely regarded as a very hard math class, and with good reason. The concepts take you far beyond the comfortable realms of algebra and geometry that you've explored in previous courses. Calculus asks you to think in ways that are more abstract, requiring more imagination.

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What level of math is derivatives? ›

Derivative: either the last year of high school or the first year of college, depending on the quality of the high school and of the student. Complex numbers: really could be anywhere from 8th grade (the year before high school, age 13–14) to the second or third year of college, when you'd take complex analysis.

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Why is derivative hard? ›

Derivatives can be difficult for the general public to understand partly because they involve unfamiliar terms. For instance, many instruments have counterparties who take the other side of the trade. The structure of the derivative may feature a strike price. This is the price at which it may be exercised.

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Do you need to memorize derivatives? ›

Derivatives formulas and rules should be memorized. Using them along with the chain rule should allow you to figure out any derivative. This includes derivatives of trig functions, logs, and exponentials. You absolutely need this knowledge to do integration.

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How do you easily understand derivatives? ›

The derivative is "better division", where you get the speed through the continuum at every instant. Something like 10/5 = 2 says "you have a constant speed of 2 through the continuum". When your speed changes as you go, you need to describe your speed at each instant. That's the derivative.

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What are the 5 derivative rules? ›

The important rules of differentiation are:

Power Rule.
Sum and Difference Rule.
Product Rule.
Quotient Rule.
Chain Rule.

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Does the derivative tell you? ›

The derivative of tells us not only whether the function is increasing or decreasing on an interval, but also how the function is increasing or decreasing.

Are derivatives hard to learn? ›

Derivatives can be difficult for the general public to understand partly because they involve unfamiliar terms.