The most infamous of these swaps were credit default swaps. They also helped cause the 2008 financial crisis. They were sold to insure against the default of municipal bonds, corporate debt, or mortgage-backed securities. When the MBS market collapsed, there wasn’t enough capital to pay off the CDS holders. The federal government had to nationalize the American International Group. Thanks to Dodd-Frank, swaps are now regulated by the CFTC.
Forwards are another OTC derivative. They are agreements to buy or sell an asset at an agreed-upon price at a specific date in the future. The two parties can customize their forward a lot. Forwards are used to hedge risk in commodities, interest rates, exchange rates, or equities.
Another influential type of derivative is a futures contract. The most widely used are commodities futures. Of these, the most important are oil price futures. They set the price of oil and, ultimately, gasoline.
Another type of derivative simply gives the buyer the option to either buy or sell the asset at a certain price and date.