Which of the following is an example of a derivative?

A derivative is a financial instrument whose value is derived from the performance of an underlying asset or group of assets. In this context, options are indeed classified as derivatives because their value is contingent upon the price movements of the underlying assets, such as stocks or indices.

Options allow an investor to enter a transaction that gives them the right, but not the obligation, to buy or sell the underlying asset at a predetermined price within a certain time frame. The pricing and potential profit or loss from options hinge entirely on the movement of the underlying asset, which is the essence of what defines a derivative.

In contrast, stocks and bonds are examples of direct investments; they represent ownership in a company or a loan to an entity, respectively, and their value is not dependent on another financial instrument. Cash, while essential in financial transactions, does not derive its value from an underlying asset; rather, it is a medium of exchange or store of value. Thus, option C accurately represents a derivative, as it directly depends on the value of the underlying asset.