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Answer Posted / rahul
derivative is an one kind of speculation device which can
use in stock market to earn good amount of money in shorter
period.for example if one farmer have 10 kg of rise which
current market price is 10*12=120, 120 is spot price and if
farmer wait for some month and he deal with other person,
come with contract and decide the future price of rise is
130, it is derive from spot price of rise and decided to
sale rise in future at rs 13 per kg.this type of
transaction called as derivative transaction. which means
price of rise decide through observation of current market
price, which help in reduce uncertain losses happen in
future due to market condition.
there is some component
like
hedging
arbitrage
all component of derivatives which use in transaction
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