Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator, and through which specific financial risks can be traded in financial markets in their own right.
The financial derivatives were also known as off-balance sheet instruments. The term derivative relates to a variety of ’financial instruments which include the following:
- Short-Term Debt Securities (Treasury Bills)
- Interest Rate
- Common Shares/Stock
- Bond and Debentures
- Stock Index Value (NSE Nifty)
- Foreign currency
- Other financial assets