Wednesday,
June 09, 2021 / 05:50 PM/
 Saurav Sharma / Header Image Credit: Skilling


Derivatives
are financial market instruments that involve a contract between two parties
for an agreed-upon event, outcome, or price movement of an asset. Derivative
instruments derive their value from the value or return of another asset or
security.

In
simple words, derivatives are a synthetic market that is derived from another
capital market. Based on supervision of the contract terms, derivatives are
mainly divided into Over the Counter (independent contract between two parties)
and exchange-traded (traded via an exchange like NGX). The derivative dealers
or clearinghouses offer different types of contracts mainly on bonds,
commodities, currencies, interest rates, stocks, and indices.

 

According
to BIS, the Notional amounts outstanding of all global OTC derivatives market (which
is the value held by a derivatives position…

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