What is a Derivative?

A derivative is a financial instrument whose value is derived from an underlying asset, index, or rate. Common types include futures, options, and swaps. These instruments enable investors to speculate on price movements, hedge against risks, or gain exposure to various markets without owning the actual asset. Derivatives derive their value from the performance of the underlying entity, allowing for flexibility in trading strategies. However, their complexity and leverage can also pose risks, requiring a good understanding of market dynamics and potential volatility.

[stroys]

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