Derivatives

Table of Contents☰

Derivatives Latest News

IndusInd Bank reported derivative losses of ₹2,100 crore on March 10, 2025, leading to a 23% decline in its share price.

About Derivatives

Financial contracts whose value depends on an underlying asset, index, or rate.
Used for hedging risks, speculation, and portfolio diversification.
Common underlying assets: Stocks, bonds, commodities, currencies, interest rates, and market indexes.

Types of Derivatives

Derivative Type	Definition	Example
Futures	Contract to buy/sell an asset at a fixed price on a future date.	Commodity traders hedging against price fluctuations.
Options	Gives the right (but not obligation) to buy (call) or sell (put) an asset at a set price before a deadline.	Stock options in equity markets.
Swaps	Agreements to exchange cash flows based on financial metrics.	Interest rate swaps to reduce borrowing costs.
Forwards	Private agreements (OTC) to buy/sell assets at a future date.	Currency forward contracts for importers/exporters.

Exchange-Traded Currency Derivatives (ETCDs)

Standardized contracts allow investors to speculate on future currency exchange rate movements.
Traded on stock exchanges, unlike Over-the-Counter (OTC) derivatives which are private.

Derivatives FAQs

Q1: What are derivatives in the financial market?

Ans: Derivatives are financial contracts whose value is derived from an underlying asset such as stocks, commodities, currencies, or interest rates.

Q2: Why are derivatives important?

Ans: Derivatives help in risk management (hedging), price discovery, and improving market efficiency.

Q3: What are the risks associated with derivatives?

Ans: Derivatives carry risks such as market volatility, counterparty default, and speculative losses.

Q4: What is the role of SEBI in regulating derivatives in India?

Ans: SEBI (Securities and Exchange Board of India) regulates derivatives trading in stock and commodity exchanges to ensure transparency and reduce market manipulation.

Source: IE

Latest UPSC Exam 2026 Updates

Last updated on Sep, 2026

→ UPSC 2027 Notification will be released on 13 January 2027 at upsconline.nic.in.

→ Check out the latest UPSC Syllabus here.

→ Download UPSC Model Answers for Mains 2026

→ UPSC Mains Question Paper 2026 is out now for Essay & GS Paper 1, 2, 3 & 4.

→ UPSC Calendar 2027 has been released.

→ Enroll in Vajiram & Ravi’s UPSC Mains Test Series 2027 for structured answer writing practice, expert evaluation, and exam-oriented feedback.

→ Join Vajiram & Ravi’s UPSC Mentorship Program 2027 for personalized guidance, strategy planning, and one-to-one support from experienced mentors.

→ Go through the UPSC Mains Previous Year Papers to enhance your preparation.

→ UPSC has released UPSC Toppers List 2025 with the Civil Services final result on its official website.

→ Also check Best UPSC Coaching in India

Vajiram Content Team

At Vajiram & Ravi, our team includes subject experts who have appeared for the UPSC Mains and the Interview stage. With their deep understanding of the exam, they create content that is clear, to the point, reliable, and helpful for aspirants.Their aim is to make even difficult topics easy to understand and directly useful for your UPSC preparation—whether it’s for Current Affairs, General Studies, or Optional subjects. Every note, article, or test is designed to save your time and boost your performance.