GENERAL KNOWLEDGE

Detailed explanation-1: -Financial derivatives contracts are usually settled by net payments of cash. This often occurs before maturity for exchange traded contracts such as commodity futures. Cash settlement is a logical consequence of the use of financial derivatives to trade risk independently of ownership of an underlying item.

Detailed explanation-2: -Derivatives include swaps, futures contracts, options, and forward contracts. Derivatives refers to financial contracts drawn between two or more parties on an underlying asset. Typically, underlying assets in derivatives are securities, currencies, indexes, and commodities.

Detailed explanation-3: -A derivative or a derivative contract is a bilateral contract the value of which is derived from the value of an underlying asset or assets at a future date. The underlying asset (often referred to as the “underlying” or “underlier") may comprise any of a number of assets.