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.