{"id":13591,"date":"2025-03-24T08:49:28","date_gmt":"2025-03-24T03:19:28","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=13591"},"modified":"2025-04-02T05:37:47","modified_gmt":"2025-04-02T00:07:47","slug":"what-are-derivatives","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-are-derivatives\/","title":{"rendered":"Derivatives"},"content":{"rendered":"<h2>Derivatives Latest News<\/h2>\n<p>IndusInd Bank reported derivative losses of \u20b92,100 crore on March 10, 2025, leading to a 23% decline in its share price.<\/p>\n<h2>About Derivatives<\/h2>\n<ul>\n<li><strong>Financial contracts<\/strong> whose value depends on an <strong>underlying asset, index, or rate<\/strong>.<\/li>\n<li>Used for <strong>hedging risks, speculation, and portfolio diversification<\/strong>.<\/li>\n<li>Common <strong>underlying assets<\/strong>: Stocks, bonds, commodities, currencies, interest rates, and market indexes.<\/li>\n<\/ul>\n<h2>Types of Derivatives<\/h2>\n<figure class=\"table\">\n<table>\n<tbody>\n<tr>\n<td>\n<p><strong>Derivative Type<\/strong><\/p>\n<\/td>\n<td>\n<p><strong>Definition<\/strong><\/p>\n<\/td>\n<td>\n<p><strong>Example<\/strong><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><strong>Futures<\/strong><\/p>\n<\/td>\n<td>\n<p>Contract to <strong>buy\/sell an asset at a fixed price on a future date<\/strong>.<\/p>\n<\/td>\n<td>\n<p>Commodity traders hedging against price fluctuations.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><strong>Options<\/strong><\/p>\n<\/td>\n<td>\n<p>Gives the <strong>right (but not obligation)<\/strong> to buy (call) or sell (put) an asset at a set price before a deadline.<\/p>\n<\/td>\n<td>\n<p>Stock options in equity markets.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><strong>Swaps<\/strong><\/p>\n<\/td>\n<td>\n<p>Agreements to <strong>exchange cash flows<\/strong> based on financial metrics.<\/p>\n<\/td>\n<td>\n<p>Interest rate swaps to reduce borrowing costs.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p><strong>Forwards<\/strong><\/p>\n<\/td>\n<td>\n<p>Private agreements (OTC) to <strong>buy\/sell assets at a future date<\/strong>.<\/p>\n<\/td>\n<td>\n<p>Currency forward contracts for importers\/exporters.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<h2>Exchange-Traded Currency Derivatives (ETCDs)<\/h2>\n<ul>\n<li><strong>Standardized contracts<\/strong> allow investors to <strong>speculate on future currency exchange rate movements<\/strong>.<\/li>\n<li><strong>Traded on stock exchanges<\/strong>, unlike <strong>Over-the-Counter (OTC) derivatives<\/strong> which are private.<\/li>\n<\/ul>\n<h2>Derivatives FAQs<\/h2>\n<p><strong>Q1: <\/strong>What are derivatives in the financial market?<\/p>\n<p><strong>Ans:<\/strong> Derivatives are financial contracts whose value is derived from an underlying asset such as stocks, commodities, currencies, or interest rates.<\/p>\n<p><strong>Q2: <\/strong>Why are derivatives important?<\/p>\n<p><strong>Ans:<\/strong> Derivatives help in risk management (hedging), price discovery, and improving market efficiency.<\/p>\n<p><strong>Q3: <\/strong>What are the risks associated with derivatives?<\/p>\n<p><strong>Ans:<\/strong> Derivatives carry risks such as market volatility, counterparty default, and speculative losses.<\/p>\n<p><strong>Q4: <\/strong>What is the role of SEBI in regulating derivatives in India?<\/p>\n<p><strong>Ans:<\/strong> SEBI (Securities and Exchange Board of India) regulates derivatives trading in stock and commodity exchanges to ensure transparency and reduce market manipulation.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/indusind-bank-derivative-losses-9894425\/\" target=\"_blank\" rel=\"nofollow noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Derivatives are financial contracts whose value is derived from an underlying asset such as stocks, commodities, currencies, or interest rates.<\/p>\n","protected":false},"author":5,"featured_media":13592,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-13591","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/13591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=13591"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/13591\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/13592"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=13591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=13591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=13591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}