DERIVATIVE MARKET

The derivative market refers to the financial market for financial instruments such as
underlying assets and financial derivatives.
Derivative
It is a financial security with a value that is reliant upon or derived from, an underlying
asset or group of assets.
The derivative itself is a contract between two or more parties based upon the
asset or assets.
Its value is determined by fluctuations in the underlying asset.
The most common underlying assets for derivatives are stocks, bonds,
commodities, currencies, interest rates, and market indexes. These assets
are commonly purchased through brokerages.
The basic principle behind entering into derivative contracts is to earn profits by
speculating on the value of the underlying asset in future.

The Derivative Market can be classified as Exchange Traded Derivatives Market and
Over the Counter Derivative Market.
Exchange Traded Derivatives
are those derivatives instruments that are traded via specialized derivatives
exchanges or other exchanges.
Over the Counter Derivatives
are contracts that are traded (and privately negotiated) directly between two
parties, without going through an exchange or other intermediary. Swaps,
Options and Forward Contracts are traded in Over the Counter Derivatives
Market or OTC market.
The OTC derivative market is the largest market for derivatives, and is mostly
unregulated with respect to disclosure of information between the parties.