Question

Which financial instrument is considered a derivative of securities?

• A. Corporate bonds
• B. Mutual funds
• C. Index futures
• D. Savings accounts

Hint:

Derivatives like index futures get their value from underlying assets and are used for speculation or hedging.

Answer 1

The Correct Option is C

A derivative is a financial instrument whose value is derived from the performance of an underlying asset, such as stocks, indices, commodities, or currencies. Index futures (Option C) are a type of derivative instrument that derive their value from a stock market index like Nifty or Sensex. They allow investors to speculate or hedge against the future movements of the index.
- Option (A) Corporate bonds are debt instruments issued by companies to raise capital — not derivatives.
- Option (B) Mutual funds pool money from investors to invest in a diversified portfolio — they are investment vehicles, not derivatives.
- Option (D) Savings accounts are bank deposit products, entirely unrelated to market-based securities or derivatives.
Therefore, among the options listed, only Index futures qualify as a derivative instrument.