Question

What are the main function of Derivative​

Answer 1

Answer:

Derivatives enable price discovery, improve liquidity of the underlying asset they represent, and serve as effective instruments for hedging. A derivative is a financial instrument that derives its value from an underlying asset. The underlying asset can be equity, currency, commodities, or interest rate.

Explanation:Derivatives are increasingly becoming an important tool for risk management. Derivatives contracts help in reducing risk by transferring the risk associated with the underlying asset to the party willing to take that risk. Some of the risks are Credit risk, Liquidity risk and market risk.

Answer 2

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