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Answer Posted / deepak tapadiya
A derivative can be defined as something which derives its
value from an underlying product being a stock, currency,
commodity or anything that carries a market price.
The market price of a product is subject to fluctuations due
to various factors effecting its demand & supply thereby
associating itself to various risk factors.
SO, derivative is a by-product of the core product which can
be used to hedge, speculate & also undertake arbitrage
activities.
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