The value of cash is dictated directly by markets. In case of a derivative- derives its value from the value of other financial asset e.g. An interest rate.
What is the difference between Cash and Derivatives?
Derivatives are basically for Fund Managers who are managing large clients Fund. To hedge against the risk, this product is offered to the Fund Manager. There is approved stocks traded in this Segement, in otherwords it is called Futures and Options. It is hybrid financial tools which can be used for commodity,currency and Interest rate hedging. The value of any item is dervied from the underlying spot asset price. Cash Market or Equity Market or Spot Market means buying the real asset by paying the full price. In the derivatives market the position taker of any underlying asset can pay only a certain amount of margin fixed by the exchange.
