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Answer Posted / bindu.r
Derivatives are financial instruments whose value changes
in response to the changes in underlying variables. They
are basically contract of future date which is used to
reduce the future risk by both the parties in the contract.
Derivatives can be based on different types of assets such
as commodities, equities (stocks), bonds, interest rates,
exchange rates, indexes (such as a stock market index,
consumer price index (CPI), inflation or weather conditions.
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