DERIVATIVE, AND THEIR ROLE IN THE FINANCIAL MARKET

Abstract

Commodities whose value is derived from the price of some underlying asset like securities, commodities, bullion, currency, interest level, stock market index or anything else are known as “Derivatives”. Or we can say that derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlying asset.

‘Futures’ and ‘options’ are two commodity traded types of derivatives. An ‘options’ contract gives the owner the right to buy or sell an asset at a set price on or before a given date.