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A derivative can be defined as something which derives its value from an underlying product being a stock, currency, commodity or anything that carries a market price.

The market price of a product is subject to fluctuations due to various factors effecting its demand & supply thereby associating itself to various risk factors.

SO, derivative is a by-product of the core product which can be used to hedge, speculate & also undertake arbitrage activities.

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Q: What do you mean by derivative?
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