What are derivatives markets
Derivatives markets are markets in which financial contracts based on the value of some underlying assets are issued and traded. The capital invested is less than the price of the underlying asset. This creates financial leverage and allows investors to multiply the rate of return on the underlying asset.
Derivatives have several uses but mostly speculation and hedging.
Description of the Derivatives Markets
Development of financial derivatives was speeded up by
the globalization of business, the increased volatility
of foreign exchange rates, and increasing and fluctuating rates of inflation.
Derivatives are
securities bearing a contractual relation to some underlying asset or rate. In general derivatives contracts promise to deliver underlying products at sometime in the future or give the right to buy or sell them in the future. They can be based on different types of assets (such
as equities or commodities, prices (such as interest
rates or exchange rates, or indexes such as a stock-market index. The derivative contract can then be traded in a different market from that in which the underlying product (equity, bonds, currency) is itself traded. Markets in which underlying products are traded (such as the forex market)
are often referred to as cash markets to
distinguish them from derivatives markets. 
