Abstract
Financial derivatives trading has become an intricate part of most modern financial markets hence an important engine for global economic growth. Interestingly, derivatives have been around for a long time with a history traceable to Babylonian times. This paper takes a position that for there to be a better understanding of the benefits and perils of derivatives, a highlight of their nature, characteristics and differences is needed. In this regard, various forms of derivatives have been looked at and analyzed in a way that demystifies them, to create a broader awareness of their role within financial markets. With such an analysis, it has even been possible to elucidate why derivatives trading tends to surpass trading in underlying assets.
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