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- Derivative markets have created an efficient system for transfer of risk throughtout a global financial system.
- They could either be traded on the organized exchanges or over-the counter.
- Derivatives are classified on the basis of nature of contract,underlying asset or market mechanism.
- Derivatives are helpful in making price discovery,hedging and speculation.
- Arbitrage is used in valuing derivatives.
- There are various sources of risk such as equity price risk,market risk,exchange rate risk and so on.
- In International derivatives market,various types of derivate instruments such as currency futures,currency options,commodity futures,interest rate swaps etc.,are available.
- In India derivatives market is growing at a reasonable pace.Derivative instruments such as Index futures,stock options,equity linked swaps etc.,are available in India.