- 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.