Derivatives are financial instruments that derive their value from an underlying asset or group of assets. These assets can include stocks, bonds, commodities, currencies, interest rates, and market indexes. Derivatives are commonly used for hedging and speculation purposes in financial markets. There are various types of derivatives, including futures contracts, options, swaps, and forward contracts. These instruments allow investors to manage risk, gain exposure to different markets, and enhance their investment strategies. Derivatives are traded on organized exchanges or over-the-counter markets, with a high level of liquidity and leverage. However, they also carry significant risks due to their complex nature and potential for high volatility. Overall, derivatives play a crucial role in modern financial markets, providing investors with the opportunity to diversify their portfolios, hedge against risks, and achieve their investment goals.