A Derivative Instrument is a financial contract whose value is derived from an underlying asset, index, or rate—such as stocks, commodities, currencies, or interest rates. Common derivatives include futures, options, swaps, and forward contracts. Derivatives are used for hedging (to reduce risk), speculation (to profit from price movements), and arbitrage (to exploit price differences across markets). In India, the NSE and BSE operate active derivatives markets, with Nifty and Bank Nifty options being among the most actively traded contracts globally by volume.
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