A derivative contract whose value is derived from the value of a fixed-income security, that is, it has it as an underlying. The underlying can also involve fixed-income instruments’ prices, interest rates, or any other relevant variable, or even a basket of fixed-income securities.

Examples include bond futures, bond options, bond swaps, etc. A bond futures is a futures contract whose value is derived from the anticipated price of an underlying bond or bond index. The broader category of fixed-income derivatives also include interest rate derivatives and credit derivatives, as well as inflation derivatives.

Fixed income derivatives (specifically, interest rate swaps, credit swaptions and credit default swaps) are liquidity traded instruments, that is, they are used for liquidity management purposes.