Vol. 5, Issue 2, Part A (2023)

Innovation of derivatives have redefined and revolutionized the landscape of financial industry across the world and derivatives have earned a well-deserved and extremely significant place among all the financial products. Derivatives are risk management tool that help in effective management of risk by various stakeholders. The emergence of the market for derivative product, most notably Forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of Fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking – in asset prices, As Instruments of risk Management; these generally do not influence the fluctuations in the underlying asset prices. However, by locking in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk – averse investors.  A sound risk management system is integral to an efficient clearing and settlement system. NSE introduced for the first time in India, risk containment measures that were common internationally but were absent from the Indian securities markets. This paper deals with investor perception in derivatives investment in Vizag city and concern issue and challenges.