DEFINATION- A security whose price is dependent upon or derived from one or more underlying assets. In other word, The Derivatives Market is meant as the market where exchange of derivatives takes place. And value of these derivatives is determined by the fluctuations in the underlying assets. These assets are most commonly stocks, commodities, interest rates, bonds, currencies, and market indices.The Derivatives can be classified as Future Contracts, Forward Contracts, Options, Swaps and Credit Derivatives.
DESCRIPTION- Derivative markets are investment markets that are geared toward the buying and selling of derivatives. Derivatives are securities, or financial instruments, that get their value, or at least part of their value, from the value of another security, which is called the underlier. The underlier can come in many forms including, commodities, mortgages, stocks, bonds, or currency.In an easy way we can define it As Derivatives are merely contracts between two or more parties, anything like weather data or amount of rain can be used as underlying assets and these darivatives can be clasified into Futures contracts, Forward contracts, Options and Swaps are the most common types of derivatives.Darivatives are genetrally used as an instrument to hedge risk, but can also be used for speculative pupose. For example, a Indian investor purcahsing sahres of an European company using Euros off of an European stock exchange whoul be exposed to excahnge-rate risk while holding that stock. To hedge this risk, the investor could puchase currency futures to lock in a specified exchange rate for the future stock sale and currency convrersion back into Rupees
IMPORTANCE OF DERIVATIVE MARKET- Derivatives are becoming increasingly important in world markets as a tool for risk management. Derivatives instruments can be used to minimise risk. Derivatives are used to separate the risks and transfer them to parties willing to bear these risks. The kind of hedging that can be obtained by using derivatives in cheaper and more convenient than what could be obtained by using cash instruments. It is so because, when we use derivatives for hedging, actual delivery of the underlying asset is not at all essential for settlement purposes. The profit or loss on derivatives deal alone is adjusted in the derivative market. It doesn't create any new risk. They simply manipulate risks and transfer them to those who are willing to bear these risks.
TYPES OF DERIVATIVE MARKET- Darivatives markets take many different foms, some of which are traded in the usual manner but some of which are traded quite differently. The following are the most ofthem traded types of derivatives markets:?~
Futures Markets- The futures market is an auction market in which participants buy and sell future contracts for delivery on a specified future date. Trading is carried on through open yelling and hand signals in a trading pit.?~
Options Markets- An option is a contract to buy or sell a specific financial product officially known as the option's underlying instrument or underlying interest. For equity options, the underlying instrument is a stock, exchange-traded fund (ETF), or similar product.?~
Warrants Markets- Warrants are securities that give the holder the right, but not the obligation, to buy a certain number of securities (usually the issuer's common stock) at a certain price before a certain time. Warrants are not the same as call options or stock purchase rights.?~
Contract For Difference Markets- Contracts for difference are one of the world's fastest-growing trading instruments. A contracts for difference creates, as its name suggests, a contract between two parties speculating on the movement of an asset price.
TRADERS IN DERIVATIVE MARKET- Three types of traders which are?~ Hedger- A hedge is a position taken in order to offset the risk associated with some other position. ?~ Speculator- While hedgers are interested in reducing or eliminating risk, speculators buy and sell derivatives to make profit and not to reduce risk. Speculators willingly take increased risks. ?~ Arbitrageur- An arbitrageur is a person who simultaneously enters into transactions in two or more markets to take advantage of discrepancy between prices in these markets.
ADVANTAGE OF DERRIVATIVE MARKET- ?~ You may lose chance to make extra money if things turn out extremely well.?~
Derivatives help discover price of an asset. How will you decide what price to pay for a stock of a company??~

Derivatives are an innovative financial products. There is no risk, no scenarios, which derivatives cannot take care.Trader or Investor make it easy through the market analyst and experts advise on derivative market. You can use also media or financial news channel for that because they provide free stock tips http://www.moneymakerfinancial.com, future and option stock tips, nifty tips, and tomorrow stock tips http://stocktips-calls.blogspot.in.