What are derivatives instruments?
Derivative instruments derive their value from another asset – called the ‘underlying asset’. The underlying asset can be anything – a precious metal, commodity, financial instrument like stocks, bonds indices etc. which has its independent value. These instruments are not assets by themselves and do not posses their own value. The price movement of the derivative product is directly related to that of underlying product. Some of the common forms of derivatives instruments that are traded are forwards, futures, swaps and options.
