"Introduction to Derivatives" provides an overview of derivatives, including futures, forwards, swaps, and options. It explains the distinction between exchange-traded and over-the-counter (OTC) markets, with exchanges increasingly adopting electronic trading. The chapter also introduces different types of traders: hedgers, who aim to reduce price risk; speculators, who take positions to profit from price movements; and arbitrageurs, who seek risk-free profits through market discrepancies.

It covers the advantages of OTC and exchange-traded markets, highlighting the freedom of participants in OTC markets and the elimination of non-honoring contract risks in exchange-traded markets. It defines and illustrates forward contracts, futures contracts, swaps, and options. Examples are given, such as a treasurer hedging against exchange rate moves using a currency forward contract.

Overall, it serves as an introductory guide to derivatives, market types, and different trader roles, offering insights into the types of derivatives available and the motivations behind trading activities.