1. Basic concepts

Derivatives are securities whose prices are dependent on one or more underlying assets. Since the value of the securities is derived from the value of the underlying assets, the securities are called derivatives.

Some examples of derivatives are: options, convertible fixed-income securities, warrants, rights offering, and swaps. Based on your understanding, identify the type of each derivative described in the following table.

Description	Type of Derivative
This securitys value depends on the value of another asset, for example, 100 shares of common stock of companies that are listed on securities exchanges or that trade over the counter.
These securities allow the owners of preferred stock to change their shares into common stock of the company to profit from the increase in the value of the common stock.
These contracts allow companies to exchange one set of cash flows for another at a specified point in time based on the value of the underlying asset.