What are derivatives in finance?
Derivatives are financial contracts whose value is derived from the performance of an underlying asset, index, or rate.
Can you give me some examples of derivatives?
Sure! Common examples include options, futures, and swaps.
How do options work?
Options give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price before a specific date.
What are the risks associated with trading derivatives?
The risks include market risk, credit risk, liquidity risk, and operational risk, which can lead to significant losses.
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