Affiliation:
1. Department of Management Studies, Naipunnya Business School, Pongam, Kerala
2. Department of BBA, Christ University, Bangalore
Abstract
This paper focused on studying the agricultural commodity prices in India and it's extreme volatility
due to many reasons such as government interference, growth, market forces factors, regular floods
and droughts, transport and warehousing problems, etc. These are contributing factors to demand
fluctuations. In this case, the future market plays an important role in the economy. The demand for
commodity futures has three particular economic functions: price discovery, price risk management,
and price volatility. The future market plays a key role in the process of price discovery. The main
aim of this system is to regulate prices to minimize uncertainty, to provide price signals to market
traders for futures spot prices through the price discovery phase. So, this study emphasized the role
of the derivative market in reducing the volatility of agricultural commodity prices in the Indian
market.
Keywords: volatility, future market, derivatives
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