Derivatives Trading in India – Inception and Future Ahead

There has been an increased integration of financial markets globally and this led to increased volatility. Some innovative financial instruments were conceived to mitigate the risks associated with the integration and for speculative purposes. These instruments are termed derivatives. The nomenclature for these instruments is intuitive as they ‘derive' their value from underlying asset classes like stocks, commodities etc. The performance of the underlying will influence the performance of derivatives.A derivatives contract will define the obligations of the two parties involved. In legal parlance, they are commercial contracts. The introduction of derivatives trading on Indian stock exchanges led to radical changes in the dynamics of Indian financial markets