Derivatives are one type of securities whose price is derived from the underlying assets i.e. a commodity or bond or equity or currency, that is why they are known as derivatives.. As derivatives are merely contracts between two or more parties, anything like weather or rain can be used as underlying assets.

Types of Derivatives are:

1. FUTURE CONTRACTS: Future contracts are no different from forward contracts as they serve the same purpose. The main difference between a future and forward is that Futures are standardized contracts whereas forwards are tailor made. Method of operation of future is also different.

2. FORWARD […] Read more