Derivative instruments are: A. An index of stock values such as the S&P 500. B.Government bonds. C.Two-party contracts that derive their value from underlying assets. D.Assets such as bonds and stocks that derive their value from the value of the companies that issue them. Solution Derivative instruments are: C. Two-party contracts that derive their value from underlying assets. Derivatives are contracts between two parties and the value (price) of the contract depends on the assets on which the contract has been made. Types of derivatives: Forwards & Futures contract, Options, Swaps, Mortgage Backed Securities. Derivatives are purchased to hedge against the risk of price rise or fall of a commodity or a security (shares or stocks)..