How many types of derivatives are there?

There are four types of derivative contracts.

• Futures contracts Futures contracts are traded on NSE or BSE exchanges and can be used to purchase or sell the underlying at a specific price or at a particular date.

• Forward contractsForwards can be traded on OTC markets. They are a custom agreement between two people to purchase or sell underlying assets at a specific date.

• Options contracts:Options allows you to purchase or sell the underlying asset at a specific date and price. Options can be traded on OTC and BSE and NSE exchanges.

• SwapsThis is a contract between two financial institutions that allows them to exchange future cash flows. Swaps are not derived from any underlying instrument. These contracts can only be traded on OTC markets.