Derivatives Markets

Derivatives markets involve trading financial contracts whose value is derived from an underlying asset, such as stocks, bonds, or commodities. These contracts include options and futures, allowing investors to hedge risks or speculate on price movements. For example, a farmer might use derivatives to lock in the price for their crop before harvest, securing income despite market fluctuations. Similarly, investors can protect themselves against potential losses or enhance their returns. Overall, derivatives play a crucial role in managing risk and improving market efficiency within the broader financial markets.