What is the difference between a security and a derivative?

The difference between a security and a derivative is that a security represents an ownership stake in a company, while a derivative does not. A security is a financial instrument that can represent an ownership interest in a company, such as stocks, bonds, and mutual funds. These securities give the holder a legal claim to the company’s assets if the company fails. Derivatives, on the other hand, do not represent ownership in a company. Instead, a derivative is a financial instrument that derives its value from some underlying asset or index, such as stocks or commodities. An example of a derivative is a futures contract which is an agreement to buy or sell a specific quantity of a commodity at a certain point in time in the future. In New York, securities and derivatives are both regulated by the state law in order to protect investors. The New York State Attorney General and its Division of Securities enforce the regulations and provide guidance for anyone looking to invest in a security or derivative. Furthermore, the New York Stock Exchange and the Financial Industry Regulatory Authority are two primary regulators of securities and derivatives.

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What is the difference between a security and a derivative?

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