Derivative Markets
Markets trading financial instruments (futures, options, swaps) derived from underlying assets.
Formula
Derivative Value = f(Underlying Asset Price, Time, Volatility)
Real World
Airlines like EasyJet use fuel futures contracts — a derivative — to lock in jet fuel prices months in advance, protecting against oil price spikes that would otherwise devastate operating costs.
Exam Focus
Focus on hedging as the business use of derivatives; speculative uses are less likely to earn marks in an AS Business context.
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