Many possibilities Sellers have a lot of freedom in deciding the specifics of derivatives. For example, with options there are decisions as to when the buyer is entitled to buy the underlying security, and for how much. For futures, and still many other parametric contracts, there is the choice of the parameters, and the function by which the price is determined. Other types of derivative range from freight derivatives to weather derivatives: the range of possible contracts is limited only by a buyer's need to offset their position, and a seller's imagination.

Explore behavior Many possible derivatives can be generated, and evaluated against possible futures that include variations in the underlying factors of which the instrument's value is derivative, and variations in how buyers may exercise any rights that are part of the contract. The cost and the performance of the derivatives can be studied to find which ones transfer risk the best, such that both the seller and the buyer benefit the most.

Opportunity Derivative securities offer opportunities for great profits, great losses, and insurance against events to which an investor may otherwise be exposed. There is a wide range of derivatives that a seller could offer, and great benefits to choosing well. Our approach provides the seller with a powerful means of comparing the predicted value and the liabilities of various possible derivatives, and of finding the successful product among them that best transfers risk between which they stand.