Question

What are derivatives? Different types of derivatives ? What are Forward contracts ?

What are Futures contracts ? Features and benefits of derivatives ?

Answer 1

Derivatives are financial instruments whose value is derived from other assets. They include forward contracts, futures contracts, options, and swaps, and offer benefits like risk management, speculation, and leveraging opportunities.

Step-by-step explanation:

Derivatives are financial securities with a value that is reliant upon or derived from an underlying asset or group of assets—a benchmark. The different types of derivatives include forward contracts, futures contracts, options, and swaps. A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A futures contract is a standardized agreement to buy or sell the underlying commodity or asset at a specific price on a future date.

Features and benefits of derivatives encompass the ability to manage risk by hedging against price movements, the potential for speculation to profit from anticipated price movements, and access to leveraged investment opportunities. These securities play a vital role in the financial markets, providing investors with a mechanism to manage financial risk.

Answer 2

Step-by-step explanation:

The most common types of derivatives are forwards, futures, options, and swaps. The most common underlying assets include commodities, stocks, bonds, interest rates, and currencies. Derivatives allow investors to earn large returns from small movements in the underlying asset's price.