Advantages of Derivatives

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Derivatives Advantages:

  • The value of the derivatives is linked to the value of the underlying asset, the contracts are primarily used for hedging risks.
  • Derivatives are frequently used to determine the price of the underlying asset.
  • It is considered that derivatives increase the efficiency of financial markets.
  • Derivatives can help organizations get access to otherwise unavailable assets or markets.
  • Derivative contracts helps to hedge the risk of high prices in the future. Most important purpose of these contracts is managing the risk.