What are derivatives in finance?

Derivatives are financial contracts that get their value from the performance of something else, like stocks, bonds, or commodities.
Another way to say it is “value-linked contract.”
Think of it like a bet on a horse race. You’re not buying the horse, but you’re making a deal based on how well the horse performs. In finance, instead of betting on horses, you’re making agreements based on things like stock prices or interest rates. Derivatives allow people to manage risk or speculate on future price movements without owning the actual asset.
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