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What is the purpose of derivatives?

Curious about derivatives

What is the purpose of derivatives?

The purpose of derivatives is to manage risks and provide financial flexibility. Derivatives are financial contracts that derive their value from an underlying asset or security, such as stocks, bonds, commodities, or currencies. Derivatives allow investors to manage risk by providing a way to hedge against price movements in the underlying asset. They also provide financial flexibility by allowing investors to gain exposure to the underlying asset without actually owning it, which can be useful in certain situations. Derivatives are used by a wide range of investors, from individual traders to large corporations, to manage their financial risks and achieve their investment objectives.

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