Though the market in its current shape is a little more than two decades old, it has taken great strides in terms of volumes, participants and infrastructure. Yet, times are pregnant with possibilities of developments in several directions. 20. Derivatives are essentially inter-temporal transactions contingent on a future view of the state of the world.
When in the underlying cash market, the exchange rate exhibits great deal of volatility, it is natural that there will be a spurt in activities in the derivatives market for different motivations: for hedging actual exposures, for arbitraging and also for speculation.