Investors participate in derivatives markets in either of the following roles

1)HEDGERS 2) SPECULATORS

3) ARBITRAGEURS

Banks treasury department uses derivatives to hedge exchange rate risks involved in international transactions. Exporters/Importers enter into swaps to convert their floating liabilities to fixed liabilities or viceversa.

Individual investors use derivatives as a trading/investing avenue and use the leverage it provides. Institutional investors also use derivatives for hedging their portfolios subject to regulatory provisions.