Derivatives pricing refers to the process of determining the value of financial instruments whose value is derived from an underlying asset, such as stocks, bonds, or commodities. Common types of derivatives include options and futures contracts. The pricing of these instruments is influenced by various factors, including the current price of the underlying asset, time until expiration, and market volatility. To accurately price derivatives, traders often use mathematical models, such as the Black-Scholes model for options. These models help estimate the fair value of a derivative by considering the potential future movements of the underlying asset and the risks involved. Understanding derivatives pricing is essential for effective risk management and investment strategies.