Derivatives in Financial Market Development
Derivatives are financial instruments whose payoffs derive from other, more primitive financial variables such as a stock price, a commodity price, an index level, an interest rate, or an exchange rate. The world market for derivatives is an immense one. The notion amount outstanding in the over-the-counter (OTC) derivatives market worldwide exceeds $640 trillion, with a collective gross market value of over $27 trillion. The exchange-traded market has another $60 trillion in outstanding notional.
