How to Apply:
Derivatives, such as futures or options, are financial instruments that derive their value from an underlying spot price. For instance, wheat farmers may opt to enter into a contract to sell their harvest at a future date to hedge against the risk of price fluctuations by that time. Such transactions occur through forward or futures markets. These markets, known as the "derivatives market," are influenced by the spot market price of the underlying asset, such as wheat.
The term "contracts" is commonly used to refer to the specific traded instrument, whether it involves derivative contracts in wheat, gold, or equity shares. Derivatives play a significant role in the global financial system, with futures and options being the most crucial contract types. The primary underlying markets include equities, treasury bills, commodities, foreign exchange, and real estate.
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