14. What is Derivative?
A derivative is a financial contract with a value that is derived from an underlying asset such as a commodity, currency, or security. Derivatives have no direct value in and of themselves - their value is based on the expected future price movements of their underlying asset. Forward contract in foreign exchange transaction, is a simple form of a derivative. Common underlying instruments include: bonds, commodities, currencies, interest rates, market indexes, and stocks. Derivatives are used for speculating and hedging purposes
