Derivative Contracts

Derivative contracts are financial agreements where the value depends on the price of another asset, such as stocks, commodities, or currencies. They are used to hedge against risk or speculate on price movements without owning the underlying asset directly. Common types include options and futures. For example, an investor might buy a futures contract to lock in the price of oil to protect against future price changes. Derivatives enable businesses and investors to manage financial risks efficiently, but they can also be complex and carry significant risk if used improperly.