An instrument (financial instrument) whose performance does not derive from value changes/ price movement of another instrument or an underlying asset. Per se, a non-derivative instrument derives its value and performance solely from its own initial net investment and any corresponding elements (such as assets financed by such an instrument, or liabilities arising therefrom, etc.)

In the context of a compound instrument (a non-derivative instrument embedded with a certain derivative instrument), the entire instrument can be perceived as an host contract/ principal contract and an embedded derivative asset. An example of such an instrument is a stock with an embedded call option held by the issuer (who can call the host instrument back according to a predefined conditions). The strike price of the option can be linked to a gold index (gold indexed callable share). The issuer (issuing entity) may choose either to exercise the option to buy its own stock for/ at a strike price linked to the gold index, or not to exercise the option and let the amount of the claim be confined to the entity’s available economic resources (as reflected in any the right of the shareholder in its net assets and a share in profit).

A non-derivative instrument is also known as a principal instrument.