Derivatives are securities whose value is derived from that of another investment. The term applies to products such as futures, options and warrants. Derivatives can be used for investment reasons (to try to make money) or to limit risk, reduce costs and/or generate additional income. Investing in derivatives also carries risks, however. In the case of a ‘short’ position, for example, where an investor aims to profit from falling prices, if the price of the underlying asset rises in value, the investor will lose money.