Derivatives in Finance

Derivatives are nothing but instruments whose value is derived from the value of something else. In other words, it can be also called as an asset, whose value is derived from other asset. The main types of derivatives are futures, forwards, options, and swaps.
Derivatives are generally used by institutional investors to increase portfolio return or to hedge portfolio risk.

Now, derivatives can be also grouped in 2 different groups such as: over the counter and exchange-traded derivatives. In case of over the counter derivatives, trading happens directly without going through any exchange.

Cheers,
Amol