Question

Foundations of Financial Management: Define and discuss what financial derivative is

Answer 1

Derivatives derive their value form underlying assets like commodities, interest rates, currencies ,etc. These are contracts between buyer and seller over the derived value from assets.Futures ,Forwards and Swaps are different derivatives.
Derivatives are used to hedge or protect from potential losses when value of assets all or to take advantage of increase in the value of asset. Swaps are used exchange interest rates and value of assets. Futures helps commodity traders to help in reducing volatility or risk involved in fluctuation of commodity prices.