30 Mar 2018

What are Derivatives ?

Finance feed by:

CA Sushil Modi
M.com,CA
CA in Job
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   •    15 Year 8 Month  experience

It is a financial instrument which derives its value/price from the underlying assets. Originally, underlying corpus is first created which can consist of one security or a combination of different securities. The value of the underlying asset is bound to change as the value of the underlying assets keep changing continuously

A derivative is a contract between two parties which derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards and swaps.

Generally stocks, bonds, currency, commodities and interest rates form the underlying asset.

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