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A derivative is a financial contract or instrument whose value is derived from the underlying asset or securities. The underlying assets can be anything from stocks, bonds, commodities, currencies, or even interest rates. Derivatives are used by traders and investors to hedge against risks, speculate on future price movements, or to gain exposure to assets that may otherwise be difficult to access. Examples of derivatives include options, futures, swaps, and forwards. They are often used to leverage investments, but can also lead to significant losses if the underlying asset does not perform as anticipated. Derivatives can be traded on exchanges or over-the-counter (OTC) markets.

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