A STUDY ON FINANCIAL DERIVATIVES
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Date
2019-07-23T11:00:26Z
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Abstract
The emergence of the market for derivatives products, most notably forwards, futures and options, can be tracked back to the willingness of risk averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. Derivatives are risk management instruments, which derive their value from an underlying asset. The following are three broad categories of participants in the derivatives market:
Hedgers
Speculators
Arbitragers By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the probability and cash flow situation of risk-averse investors.
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1NZ17MBA71