There are four types of basic derivatives. Any derivative which doesn’t fall into one of these basic types falls into a fifth catch-all category called exotic derivatives. The types of derivatives are:

Forwards – A forward contract is an agreement to trade something at a specified price on a specified future date.

Futures – A futures contract is a standardized forward contract traded at an exchange

Options – An options contract grants its holder the right, but not the obligation, to buy or sell something at a specified price, on or before a specified date.

Swaps – A swap contract is an agreement to exchange future cash flows. Typically one set of cash flows is variable and the other is fixed.

Exotic Derivatives – An exotic derivative is any derivative which has features that make it more complex than common derivatives.