30-08-2017, 12:28 PM
At present, Indian stock markets do not have hedging instruments that allow investors to manage and minimize risk. In industrialised countries, apart from money market and capital market securities, a variety of other securities known as derivatives have been made available to investors. The derivatives originate in mathematics and refer to a variable that has been derived from another variable. A derivative is a financial product that has been derived from another financial product or merchandise. Derivatives do not have independent existence without underlying product and market. Derivatives are contracts that are written between two parties for easily tradable assets. Derivatives are also known as deferred delivery or deferred payment instruments. Since financial derivatives can be created by mutual agreement, the types of derivative products are limited only by imagination and therefore there is no definitive list of derivative products.