system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: What do investors mean when they talk about derivatives?

What are derivatives and how are mortgage derivatives different than others?
gpt
A derivative is any financial product that is based on the performance of another underlying product.

For example, a bank which has issued mortgages might offset its position by issuing a "Mortgage Backed Security". This is a derivative where the payments are based on many individual mortgages. If the homeowners don't pay up, the note pays less.

For an MBS, the mortgage is the underlying, but there are many types of other derivatives.