Shaving is a daily ritual that bridges the gap between self-care and grooming. At the heart of this ritual lies the essential tool known as shaving cream. This seemingly humble product plays a crucial role in achieving a smooth, comfortable, and irritation-free shave. In this exploration of shaving cream, we delve into its history, composition, types, application techniques, and its significance in modern grooming.

A Historical Glimpse

The practice of shaving dates back centuries, with various cultures employing different methods and substances to enhance the shaving experience. Ancient Egyptians, for example, used a mixture of animal fat and wood alkali to create a rudimentary shaving cream. However, the modern concept of shaving cream as we know it today began to take shape in the 19th century.

The earliest commercial shaving creams were introduced in the mid-1800s and were often available in solid or semi-solid forms. These early versions were primarily made from a combination of soap and water, with some formulations incorporating natural oils and fragrances. The evolution of technology and chemistry over the decades led to the development of more sophisticated and effective shaving creams that catered to specific skin types and preferences.

Composition and Formulations

Modern shaving creams are formulated to provide a luxurious and comfortable shaving experience. They consist of a blend of ingredients carefully chosen to create a rich lather, soften facial hair, and lubricate the skin. The primary components of shaving cream include:

Water: Water serves as the base of most shaving creams, providing the necessary fluidity for the product to be easily applied to the skin.

Soap: Soap, usually in the form of potassium or sodium salts of fatty acids, acts as a surfactant that breaks down oils and dirt, allowing for a thorough cleanse of the skin and hair.

Emollients and Oils: Natural oils, such as coconut oil, jojoba oil, and glycerin, are commonly added to shaving creams to moisturize and soften the skin and hair, reducing the friction caused by the razor.

Fragrance: Essential oils and synthetic fragrances are often included to enhance the sensory experience of shaving. These scents can range from traditional, woody aromas to more contemporary, citrusy notes.

Humectants: Ingredients like glycerin help retain moisture on the skin's surface, preventing excessive drying during the shaving process.

Stabilizers and Thickeners: These additives maintain the consistency of the shaving cream, allowing it to be easily whipped into a lather.

Types of Shaving Cream

Shaving creams come in a variety of formulations, each catering to different skin types, preferences, and techniques. The main types include:

Traditional Shaving Cream: These are often found in tubs or tubes and require the use of a shaving brush to create a lather. Traditional shaving creams offer a classic, nostalgic experience and are favored by wet shaving enthusiasts.

Brushless Shaving Cream: Also known as shaving gels or foams, these products do not require a brush for lathering. They are dispensed as a gel or foam and are particularly convenient for those seeking a quick and fuss-free shave.

Shaving Soap: While not exactly a cream, shaving soaps are solid formulations that require a brush to create a lather. They often have a more traditional feel and can provide a rich, dense lather.

Cream-to-Foam Shaving Cream: These products start as a cream and transform into a rich foam when applied to the skin. They offer a compromise between the traditional and brushless options.

Application Techniques

Achieving the perfect lather is key to a comfortable and close shave. Whether Pure Badger Shaving Brushes using a traditional shaving cream, brushless gel, or shaving soap, the following techniques can help create an optimal lather:

Traditional Shaving Cream with a Brush: Wet the brush with warm water, then swirl it in the shaving cream until a rich lather forms. Apply the lather to the face using circular motions, ensuring an even distribution.

Brushless Shaving Cream or Gel: Dispense a small amount of the product onto wet hands. Rub the product between your palms to create a lather, then apply it to the face.

Shaving Soap with a Brush: Wet the brush and then use circular motions to load the brush with soap. Transfer the loaded brush to a shaving bowl or directly to the face, then whip the lather into a rich foam.

Cream-to-Foam Shaving Cream: Apply a small amount of the cream to a wet face and massage it in. The product will transform into a lather as you work it.

Significance in Modern Grooming

In the era of multi-blade razors and electric shavers, the role of shaving cream might seem diminished. However, its importance in modern grooming cannot be overstated. Here are some reasons why shaving cream remains an integral part of the shaving process:

Protection and Lubrication: Shaving cream creates a protective barrier between the razor and the skin, minimizing friction and reducing the risk of nicks, cuts, and irritation.

Softening Facial Hair: The emollients and oils in shaving cream help to soften the hair, making it easier to cut and reducing the force required during shaving.

Moisturization: The moisturizing properties of shaving cream prevent the skin from drying out during the shaving process, leaving it feeling soft and supple.

Enhanced Sensorial Experience: The scents and textures of shaving creams add a sensory dimension to the shaving ritual, transforming it from a routine task into a moment of self-indulgence.

Preparation for Shaving: The act of applying shaving cream serves as a preparatory step, opening up the pores and lifting the hair follicles, resulting in a more effective and comfortable shave.

Conclusion

Shaving cream, with its rich history, diverse formulations, and multifaceted benefits, remains an essential component of the shaving ritual. Whether one prefers the traditional experience of using a brush and soap or the convenience of brushless gels, the act of lathering up with shaving cream continues to bridge the gap between personal care and grooming. In a world where efficiency often trumps tradition, the enduring significance of shaving cream as a tool for achieving a close, comfortable, and enjoyable shave reminds us that the simple acts of self-care can be imbued with meaning and satisfaction.

Cannabidiol (CBD) has gained significant attention in recent years due to its potential health benefits and its association with cannabis. CBD is a natural compound found in the cannabis plant, but it does not have the psychoactive effects commonly associated with marijuana use. In this comprehensive guide, we will delve into the various aspects of CBD, including its origins, extraction methods, potential health benefits, and legal status. Whether you are a curious individual or considering incorporating CBD into your wellness routine, this guide will provide you with valuable insights.

Origins and Extraction Methods

CBD is one of many cannabinoids present in cannabis plants. It can be derived from both marijuana and hemp plants, although hemp is the primary source due to its low THC content. THC is the psychoactive compound responsible for the "high" associated with marijuana use, whereas CBD does not have these mind-altering effects.

The extraction of CBD involves various methods, with the most common being CO2 extraction and ethanol extraction. CO2 extraction is considered the gold standard as it yields a pure and potent CBD extract. This method uses pressurized carbon dioxide to extract the cannabinoids from the plant material. Ethanol extraction involves soaking the plant in ethanol to separate the CBD from the rest of the plant components.

Potential Health Benefits

CBD has been the subject of extensive research to explore its potential health benefits. While more studies are needed to establish conclusive evidence, early research and anecdotal reports suggest that CBD may have several therapeutic properties. Here are some of the potential health benefits associated with CBD:

Pain Relief: CBD has been studied for its analgesic properties and its potential to alleviate chronic pain, including conditions such as arthritis and multiple sclerosis. It is believed that CBD interacts with receptors in the endocannabinoid system, which plays a role in regulating pain.

Anxiety and Depression: Preliminary studies suggest that CBD may have anxiolytic and antidepressant effects, making it a potential alternative for individuals struggling with anxiety disorders and depression. CBD is thought to interact with serotonin receptors in the brain, which are involved in mood regulation.

Neuroprotective Properties: CBD has shown promise in studies focused on neurodegenerative diseases, such as Alzheimer's and Parkinson's. It is believed that CBD's anti-inflammatory and antioxidant properties may help protect brain cells from damage.

Epilepsy: One of the most well-established uses of CBD is in the treatment of epilepsy, particularly in children with severe forms of epilepsy that do not respond well to traditional medications. In fact, there is an FDA-approved CBD medication called Epidiolex for the treatment of certain types of epilepsy.

Sleep Disorders: CBD has gained popularity among individuals struggling with sleep disorders, such as insomnia. Some studies suggest that CBD may improve sleep quality by reducing anxiety and promoting relaxation.

Other Potential Benefits: CBD is also being explored for its potential in managing symptoms related to conditions such as acne, addiction, cancer-related symptoms, and high blood pressure. However, further research is needed to confirm these effects.

Forms of CBD Products

CBD products come in various forms to suit different preferences and needs. Here are some of the most common types of CBD products:

CBD Oil: CBD oil is one of the most popular forms of CBD. It is made by diluting CBD extract with a carrier oil, such as hemp seed oil or MCT oil. CBD oil is typically taken sublingually (under the tongue) for faster absorption into the bloodstream.

Capsules and Pills: CBD capsules and pills provide a convenient and precise way to consume CBD. They contain pre-measured doses of CBD and are swallowed like any other supplement.

Edibles: CBD-infused edibles, such as gummies, chocolates, and beverages, are a tasty and CBD et troubles de la vision discreet way to consume CBD. Edibles may take longer to take effect compared to other methods due to the digestion process.

Topicals: CBD topicals include creams, lotions, and balms that are applied directly to the skin. These products are commonly used for localized relief, such as muscle soreness or joint pain.

Vaping: CBD vape products are inhaled using a vaporizer or vape pen. Vaping allows for quick absorption of CBD into the bloodstream but may carry certain risks associated with vaping itself.

Other Forms: CBD can also be found in products such as sprays, tinctures, and even as an ingredient in skincare and beauty products.

Dosage and Safety Considerations

Determining the appropriate CBD dosage can be challenging, as it varies depending on factors such as body weight, individual tolerance, and the desired effects. It is recommended to start with a low dose and gradually increase it until the desired results are achieved.

CBD is generally considered safe, and significant side effects are rare. However, some individuals may experience mild side effects, including drowsiness, dry mouth, diarrhea, or changes in appetite. It is essential to consult with a healthcare professional, especially if you have pre-existing medical conditions or are taking other medications, to ensure CBD is safe for you.

Legal Status of CBD

The legal status of CBD varies from country to country and within different jurisdictions. In many countries, CBD extracted from hemp plants with less than 0.3% THC is legal, while CBD derived from marijuana may be subject to stricter regulations. However, it is important to research and understand the specific laws and regulations in your region before purchasing or using CBD products.

Conclusion

CBD has emerged as a promising natural remedy with potential health benefits. While research is still ongoing, the available evidence suggests that CBD may be useful in managing pain, anxiety, depression, epilepsy, and various other conditions. It is important to note that CBD is not a miracle cure, and individual results may vary. If you are considering using CBD, it is advisable to consult with a healthcare professional to ensure it is suitable for your specific circumstances. Additionally, always purchase CBD products from reputable sources and be aware of the legal status in your area.

Vaping has gained immense popularity in recent years as an alternative to traditional smoking. One of the key components of a satisfying vaping experience is having the right vape kit. A vape kit typically consists of a mod, tank, coils, and other accessories necessary for vaping. With so many options available in the market, choosing the right vape kit can be overwhelming for beginners. This guide aims to provide a comprehensive overview of vape kits, their components, and factors to consider when selecting the perfect kit for your vaping needs.

Understanding Vape Kit Components:
Mod:
The mod is the main body of a vape kit, which houses the battery and regulates the power output. Mods can be either regulated or unregulated. Regulated mods offer variable wattage, temperature control, and other safety features, while unregulated mods provide direct power output.

Tank:
The tank holds the e-liquid and houses the atomizer coil. It consists of a reservoir for e-liquid and a chimney that connects to the mouthpiece. Tanks can be either sub-ohm tanks (designed for direct-to-lung vaping) or mouth-to-lung tanks (suitable for a more cigarette-like experience).

Coils:
Coils are the heating elements that vaporize the e-liquid. They come in different resistance levels and materials, such as kanthal, stainless steel, or nickel. The coil resistance affects the vapor production and flavor.

Batteries:
Most vape mods require external batteries, typically 18650 or 21700 cells. It's essential to choose high-quality batteries from reputable brands to ensure safety and optimal performance.

Accessories:
Vape kits may include additional accessories like spare coils, replacement glass, charging cables, and user manuals. These accessories can vary depending on the manufacturer and kit model.

Factors to Consider When Choosing a Vape Kit:
Vaping Style:
Consider your preferred vaping style before choosing a vape kit. If you enjoy direct-to-lung vaping with large vapor production, a sub-ohm kit with high wattage capabilities and large airflow would be suitable. For those who prefer a tighter draw and a more discreet vape, a mouth-to-lung kit with higher resistance coils would be preferable.

Experience Level:
Beginners should opt for user-friendly vape kits with straightforward operation and safety features. Advanced users may prefer more customizable options with temperature control and variable wattage settings.

Battery Life:
If you are a heavy vaper or frequently on-the-go, consider a vape kit with longer battery life or the option for external batteries. This ensures you won't run out of power during the day.

Build Quality:
Look for vape kits made by reputable manufacturers known for their quality and reliability. Reading reviews and checking customer feedback can help gauge the build quality and durability of a kit.

Price Range:
Vape kits vary significantly in price. Set a budget and explore kits within that range. Keep in mind that investing in a higher-quality kit may result in a better vaping experience and longer-term satisfaction.

Different Types of Vape Kits:
Pod Systems:
Pod systems are compact and user-friendly vape kits with a small battery and disposable or refillable pods. They are ideal for beginners and individuals looking for portability and convenience. Pod systems typically use higher nicotine concentrations, making them suitable for nicotine salt e-liquids.

Starter Kits:
Starter kits are designed for beginners and usually consist of a basic mod and tank. These kits are simple to use and provide a smooth transition from traditional smoking to vaping. They are available in various styles and sizes, catering to different vaping preferences.

Sub-Ohm Kits:
Sub-ohm kits are designed for vapers who enjoy direct-to-lung vaping and prefer larger clouds of vapor. These kits feature powerful mods, sub-ohm tanks, and low-resistance coils. Sub-ohm kits require higher wattages and produce more vapor, resulting in an intense vaping experience.

Squonk Kits:
Squonk kits, also known as bottom-feeders, have a unique design where the mod contains a built-in e-liquid bottle. This allows users to squeeze the bottle, delivering e-liquid to the atomizer through a hollow 510 connection. Squonk kits are popular among enthusiasts who enjoy the convenience of dripping without the need for constant manual dripping.

Temperature Control Kits:
Temperature control (TC) kits allow users to control the temperature of the coil, resulting in a consistent vaping experience and preventing dry hits. These kits are suitable for vapers who prefer specific temperature settings and want to avoid overheating the coil.

Additional Tips for Choosing the Right Vape Kit:
Research and Reviews:
Before purchasing a vape kit, conduct thorough research best e-juices and read reviews from reliable sources. This helps to gather information about the performance, durability, and user experiences of different kits.

Visit Local Vape Shops:
Visit local vape shops to get hands-on experience with different vape kits. The staff can provide guidance and help you find the perfect kit based on your preferences.

Consider Future Upgrades:
If you are planning to explore advanced vaping techniques like rebuildable atomizers (RDA/RTA) or temperature control, consider a vape kit that offers room for future upgrades and customization.

Safety Considerations:
Safety should always be a priority. Choose vape kits from reputable manufacturers with proper safety features, such as short-circuit protection, overheat protection, and battery venting mechanisms. Avoid purchasing cheap or counterfeit vape kits as they may compromise safety.

E-Liquid Compatibility:
Ensure the vape kit you choose is compatible with a wide range of e-liquids. Some tanks and coils are optimized for specific types of e-liquids, so it's important to check compatibility to avoid compatibility issues or flavor inconsistencies.

Conclusion:

Selecting the right vape kit is crucial for a satisfying and enjoyable vaping experience. Consider your vaping style, experience level, battery life, build quality, and price range when choosing a kit. Explore different types of kits such as pod systems, starter kits, sub-ohm kits, squonk kits, and temperature control kits to find the one that suits your preferences. Research, read reviews, and consult with local vape shops to gather information and make an informed decision. Remember to prioritize safety and choose kits from reputable manufacturers. With the right vape kit in hand, you can embark on a delightful vaping journey.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial Produit série crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early Produits dérivés cinéma 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.