A hybrid derivative whose underlying is an equity instrument or similar instruments, but it combines it with other asset classes or instruments. In general, financial derivatives can be divided into basic derivatives and hybrid derivatives. An equity hybrid derivative results from combining a host contract (the equity core) with an embedded derivative:

Equity hybrid derivative = equity host contract + embedded derivative

For example, combining a share of stock (a division of equity) and an option in the same instrument gives out an equity hybrid derivative. Equity hybrid derivatives typically consist of a basic financial component (share of stock) and a derivative component (call options, put options, etc.)

Equity hybrid derivatives combine various, established asset classes of derivatives including equity derivatives, credit derivatives, interest rate derivatives, foreign exchange derivatives, and commodity derivatives.