Brief Description of Derivatives

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NILESH

NILESH (Querist)
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21 August 2010 Can anyone explain me the meaning of Derivatives in simple language which is understand the concept.

CA PRAMOD SARAOGI

CA PRAMOD SARAOGI (Expert)
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21 August 2010 Derivatives are the types of securities whose price is derived from the underlining Assets and value of these derivatives is determined by the fluctuations in the underlying assets. These underlying assets are most commonly stocks, bonds, currencies, interest rates, commodities and market indices. As Derivatives are merely contracts between two or more parties, anything like weather data or amount of rain can be used as underlying assets. The Derivatives can be classified as Future Contracts, Forward Contracts, Options, Swaps and Credit Derivatives.

For a layman, Derivatives in India means trading in Futures and Options in the Stock Market.Trading may be shares of Listed Companies or the Indices like Nifty