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kleinbl00 · 3056 days ago · link · · parent · post: Larry Summers: Interest rates are at inconceivable levels, and we must confront what that means
Derivatives are securities. So what's a derivative? Let's say you have a house. It's worth X. Let's say I decide to sell stock in the value of your house. It's worth X x Y, with Y being whatever the fuck I want it to be. The underlying fundamental value of your house and the stock combined is X. However, the securities value of your house is X plus X x Y. It's not as completely simple as that (you can't trade your house on the stock market... at least, if you're living in it) but options, futures contracts, derivatives, mortgage-backed securities, they're all securities. "Fixed income securities" are basically bonds, issued by bond issuers, backed by whatever the fuck they feel like backing it with. It's all just contracts.