What is a Derivative Market?
Derivative markets are investment markets that are geared toward the buying and selling of derivatives. Derivatives are securities, or financial instruments, that get their value, or at least part of their value, from the value of another security, which is called the underlier. The underlier can come in many forms including, commodities, mortgages, stocks, bonds, or currency. The reason investors may invest in a derivative security is to hedge their bet. By investing in something based on a more stable underlier, the investor is assuming less risk than if she invested in an risky security without an underlier. There are actually two distinct forms of the derivative market. It is possible to purchase and sell derivatives in the form of futures or as over-the-counter offerings. It is not unusual for investors who are interested in derivatives to actively participate in both of these financial markets. In the case of futures, there are futures markets around the world that allow trading
Derivative markets are investment markets that are geared toward the buying and selling of derivatives. Derivatives are securities, or financial instruments, that get their value, or at least part of their value, from the value of another security, which is called the underlier. The underlier can come in many forms including, commodities, mortgages, stocks, bonds, or currency. The reason investors may invest in a derivative security is to hedge their bet. By investing in something based on a more stable underlier, the investor is assuming less risk than if she invested in an risky security without an underlier. There are actually two distinct forms of the derivative market. It is possible to purchase and sell derivatives in the form of futures or as over-the-counter offerings. It is not unusual for investors who are interested in derivatives to actively participate in both of these financial markets.
