Many money managers use derivatives for a variety of purposes, such as hedging — by taking a position in a derivative, losses on portfolio holdings may be minimized or offset by profits on the derivative. Likewise, derivatives can be used to gain quicker and more efficient access to markets; for example, it may be easier and quicker to purchase an S & P 500 futures contract than to invest in the underlying securities. Derivatives are a contract between two parties that specify conditions (especially the dates, resulting values and definitions of the underlying variables, the parties' contractual obligations, and the notional amount) under which payments are to be made between the parties. The most common underlying assets include commodities, stocks, bonds, interest rates and currencies, but they can also be other derivatives, which adds another layer of complexity to proper valuation. Still, even these scaled down figures represent huge amounts of money.
• Financial Markets