what is derivative | Candider
what is derivative
3rd Mar 2020 3:52 pm
Business expert
The following result is obtained by our Internet Research Algorithm: A derivative is a futures contract that obligates the buyer to buy the asset and the seller to sell the assets at a predetermined future date and price. Suppose you have a chick and you want to raise it to sell it as a roaster, but you are sceptical that it could die of bird flu. Raising cost is ₹50 and supposed market price of roaster would be ₹200, so you decided to come under a derivative contract with an investor you would like to buy the roaster at ₹100 definitely whatever the situation will be. If chick died then you will get the profit ₹50, if it becomes roaster successfully then the investor will sell it for ₹200 and get the profit of ₹100. Here consider chick as an asset. Derivatives are done for assets, The commonly used assets are stocks, bonds, currencies, commodities and market indices in case of derivatives.
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