WHAT IS DERIVATIVE?
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Answer Posted / tanzeem
A derivative can be defined as something which
derives its value from an underlying product being a stock,
currency, commodity or anything that carries a market
price.
The market price of a product is subject to
fluctuations due to various factors effecting its demand &
supply thereby associating itself to various risk factors.
SO, derivative is a by-product of the core product which
can be used to hedge, speculate & also undertake arbitrage
activities.
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