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What is a derivatives market?

The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets . The market can be divided into two, that for exchange-traded derivatives and that for over-the-counter derivatives.

Why do traders use derivatives?

Traders use derivatives to access specific markets and trade different assets. Typically, derivatives are considered a form of advanced investing. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes.

What is the difference between traditional trading and derivative trading?

Unlike traditional trading, which is straightforward, derivative trading requires a sound knowledge of the market and the trends. The derivative market is a financial marketplace where derivatives are traded. Derivative instruments can either be traded on the exchange or over the counter.

What is the market value of over the counter derivative trades?

The over the counter derivative trades are much more popular and have a $600 trillion market value. Even though the notional amount for derivative trades is high, the market value is declining due to the financial slowdown in the global economy.

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