The term ‘Derivative’ indicates that it has no independent value. Its value is entirely ‘derived’ from the value of its underlying asset. The underlying asset can be securities, commodities, bullion, currency, livestock, etc. In other words, Derivative means a forward, future, option or any other hybrid contract of pre-determined duration, which is linked for the purpose of contract fulfillment to the value of a specified real or financial asset.
Derivatives include -
A security derived from a share, loan, and debt instrument whether secured or unsecured, risk instrument or contract for differences or any other form of security.