Because they are all derived from the value of underlying assets, all futures contracts are forms of 'derivative'.
All futures contracts are classified as derivatives because their values are based on the underlying assets from which they originate. This means that the performance and worth of these contracts are closely linked to the market conditions of their respective assets, such as commodities, currencies, or securities.
Diving into the nature of derivatives, we can see that they serve as financial instruments that allow investors to speculate on price movements or hedge against potential losses. Understanding this relationship between futures contracts and underlying assets is crucial in grasping the complexities of modern financial markets.
