BSE first to launch commodity derivatives contract in gold and silver

Background:

Till date, commodity derivatives contract are available only on MCX and NCDEX, the two specialised commodity derivatives exchanges in the country. The launch of commodity derivatives platform on the BSE will help in efficient price discovery, reduce timeline and make it cost-effective.

Definition: A derivative is a contract between two parties which derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards and swaps.

Description: It is a financial instrument which derives its value/price from the underlying assets. Originally, underlying corpus is first created which can consist of one security or a combination of different securities. The value of the underlying asset is bound to change as the value of the underlying assets keep changing continuously. Generally stocks, bonds, currency, commodities and interest rates form the underlying asset.

Sources: the hindu.