Define 'financial derivatives.'

Financial derivatives are financial instruments whose value is based on the price movements of an underlying asset. This underlying asset can be anything from stocks and bonds to commodities and interest rates. The essence of a financial derivative is that it derives its value from the performance of these underlying assets, making option B the correct definition.

Derivatives are commonly used for hedging risk, speculation, or arbitrage. For instance, if an investor uses a derivative based on the stock of a company, the value of that derivative will fluctuate in relation to changes in the stock price. This relationship is what distinguishes derivatives from other financial instruments.

The other options describe concepts unrelated to the definition of financial derivatives. For example, the first option suggests that the value of financial contracts is independent of any underlying asset, which contradicts the very nature of derivatives. The third option presents newly issued stocks, which do not fit the definition of derivatives since they represent ownership in a company rather than contracts with values dependent on other assets. The last option describes instruments that provide guaranteed returns, which is more indicative of fixed-income securities rather than derivatives, whose value can fluctuate widely based on market conditions.