Derivatives
💡 In plain English: Financial contracts whose value is derived from an underlying asset — used for hedging risk or speculation.
Definition
Financial instruments whose value is based on the performance of an underlying asset, index, or rate. Includes futures, options, swaps.
📌 Real-World Example
You hold ₹10L in stocks. Buy a Nifty Put option as insurance — if Nifty falls 15%, your option profit offsets some stock loss. That's hedging. Speculating with derivatives without understanding them causes large losses.
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