Derivatives market - Financial definition
Concise definition of the term derivatives market
A derivatives market is a financial market for trading securities that derive their value from an underlying asset, such as stocks, bonds, commodities, or currencies. It includes instruments like futures, options, and swaps.
Comprehensive definition of the term derivatives market
Derivatives markets play a crucial role in the global financial system by allowing participants to hedge risks, speculate on price movements, and gain exposure to assets without owning them directly. Key instruments traded in these markets include futures contracts, which obligate the purchase or sale of an asset at a future date and specified price; options, which give the right but not the obligation to buy or sell an asset; and swaps, where two parties exchange cash flows or other financial instruments. Derivatives are used by a wide range of market participants, including financial institutions, corporations, and individual investors, to manage financial risk, enhance returns, and improve the efficiency of capital allocation.
Additional information related to this definition
Definitions of related terms
Bond • Equities • Equity market • Financial market • Financial system • Futures contract • Option • Swap