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Derivatives as the name suggests derive its value from an underlying asset. The main purpose of derivatives is to hedge the risk. Hedging means it helps to reduce the risk but it does not necessarily eliminate the risk. However it needs special precaution to take when one is going to use the derivatives otherwise it will be like a double edged sword.
Business like banks and corporate use derivatives to hedge the fluctuations in the market, be it the interest rate or the currency. Fluctuations in interest rates are the ones where banks are interested to use interest rate future(used as derivatives),plain vanilla interest rate swap etc.
A company like CocaCola might be interested to hedge its risk of not getting profit if the season for its coke does not pick up due to bad weather ahead. One can not predict the weather so in this case derivatives like weather derivatives are used to hedge the risk.
However as a market participant one can use the derivatives for the purpose of trading also. Trading on options or futures where shares or indexes can be an underlying asset. Traders also try to guard against the falling Stock Market.
There are different inputs required for them which are mostly mathematical and statistical. Those instruments has to be priced using some methods which are always complex. Different complex strategies like stradle and strangle etc are used in case options.
It is a kind of insurance against the probable losses in future. But one has to do it cautiously otherwise there will be the opposite impact.
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Why is derivatives important?
the simply meaning of derivative is a market which is helps to minimized the risk of loss. and the main objective if any business is to bring maximized profit to company so that's the reason to derivatives is important.
What do equity derivatives refer to?
Equity derivatives refer to the options and futures one has when trading or selling off different equitable assets. Equity options are the most common derivatives that there are.
What is derivatives in terms of finance..?
In finance, a derivative is a financial instrument (or, more simply, an agreement between two parties) that has a value, based on the expected future price movements of the asset to which it is linked-called the underlying asset-such as a share or a currency. There are many kinds of derivatives, with the most common being swaps, futures, and options. Derivatives are a form of alternative investment. A derivative is not a stand-alone asset, since it has no value of its own. However, more common types of derivatives have been traded on markets before their expiration date as if they were assets. Among the oldest of these are rice futures, which have been traded on the Dojima Rice Exchange since the eighteenth century. Derivatives are usually broadly categorized by: * the relationship between the underlying asset and the derivative (e.g., forward, option, swap); * the type of underlying asset (e.g., equity derivatives, foreign exchange derivatives, interest rate derivatives, commodity derivatives or credit derivatives); * the market in which they trade (e.g., exchange-traded or over-the-counter); * their pay-off profile. Another arbitrary distinction is between: * vanilla derivatives (simple and more common); and * exotic derivatives (more complicated and specialized).
Is it correct to say business are business?
No, use "is" instead.
What is the use of a miniorty small business loan?
The use of a minority small business loan is to give a small business a small amount of money which later will have to be re payed. These are mostly used when a business starts out.
Application of derivatives in general life?
Are you asking a math question or a business question? Why are you asking it in the "relationships" area?
If the exponent is in cosine the formula to use is cosine derivatives?
pen0r
Why is derivatives important?
the simply meaning of derivative is a market which is helps to minimized the risk of loss. and the main objective if any business is to bring maximized profit to company so that's the reason to derivatives is important.
What is derivatives in banking?
what is derivatives in banking
Cos x sin x derivative?
You can use the rule for multiplying derivatives.
What unit of measure do you use to measure an animal?
Kilograms, or its derivatives. Pounds or its derivatives. Metres, feet, yards, inches or specific ones such as 'hands' where horses are concerned. It depends what you are measuring.
What is anasoles use?
Anisole is mainly used for its derivatives for many natural and artificial toiletry uses. Its derivatives are often used in items like perfume, pharmaceuticals, and some insect pheromones.
Uses of derivative in daily life?
Most people rarely sit down and think that they are calculating derivatives, however derivatives are used in almost every process that we do. Simple driving uses derivatives to calculate speed. Computers use derivatives for a lot of signal processing algorithms. The stock market uses derivatives to see if a stock how stocks are changing. Anything that relates two values at different times most likely uses a derivative process.
What is the formula for derivatives?
this site has info/formulas about derivatives and limits: http://www.scribd.com/doc/14243701/Calculus-Derivatives-Formula
What are derivatives for the latin word aquae?
Some derivatives are aqueous, aquaduct, aquifer.
What are derivatives and their uses?
derivatives are the functions required to find the turning point of curve
When was Swiss Derivatives Review created?
Swiss Derivatives Review was created in 1997.
