Final answer:
The statement is true; a derivative is indeed a financial instrument that derives its value from other assets or indices, often used for hedging or speculation.
Step-by-step explanation:
True, a derivative is a financial instrument that derives its value from another financial instrument, an underlying asset, or indices. Derivatives are complex investment vehicles which can link to the outcome of various events, such as the default rate of mortgages. They can be utilized to hedge risks, or for speculation, allowing the parties involved to bet on the future value of the underlying asset. An example mentioned earlier is the case where derivatives might have acted as a form of insurance for banks holding mortgages, potentially reducing risk in the event of loan defaults. However, due to their intricate and leveraged nature, they can also substantially amplify risks, as was the case during financial crises where their complexity and misuse led to catastrophic economic consequences.