MADE BY : VISHAL SINGH

The

derivatives market is the financial market for derrivatives, financial instrument like futures contracts or options, which are derived from other forms of asset.
are investment markets.

Derivatives

They

derive value from an underlying asset classes.

 Hedgers

( its reduce the risk )

Speculators Arbitrage

( its take risk to make profit )

( its risk free and its make a earn more profit in future)

 It

is important to understand the underlying asset class before using derrivatives Assets classes can be classified into two broad categories-which includes currencies and commodities. Financial assets classes can be broadly categorised into interest rates,equities and currencies. Commodities range from agricultural commodities to minerals and metals.

Derivative is a financial instrument whose value depends on other, more basic, underlying variables. Derivatives have become increasingly important in the field of finance. (a) Increased volatility in asset prices in financial markets. (b) Increased integration of national financial markets with the international markets .

 The

derivatives market performs a number of economic functions First, prices in an organized derivatives market reflect the perception of market participants about the future and lead the prices of underlying to the perceived future level. Second, the derivatives market helps to transfer risks Third, derivatives, due to their inherent nature, are linked to the underlying cash markets

 Fourth,

speculative trades shift to a more controlled environment of derivatives market

an important incidental benefit that flows from derivatives trading is that it acts as a catalyst for new entrepreneurial activity

Fifth,

Finally,

derivatives markets help increase savings and investment in the long run. Transfer of risk enables market participants to expand their volume of activity.

Thank you !