What are derivatives?

Derivatives are financial contracts that derive their value from an underlying asset or group of assets. The underlying assets can include commodities, currencies, stocks, bonds, interest rates, and other financial instruments. The value of a derivative contract is based on the expected future price movements of the underlying asset. Derivatives can be used for a variety of purposes, including hedging against risk, speculating on price movements, and creating synthetic exposures to specific assets or markets. Some common types of derivatives include options, futures, swaps, and forwards.