What is Derivative? Is it just the financial instrument or it is anything around us?

From a financial implication, Derivatives are largely speculative instruments in the form of contracts created to ensure larger volumes with slightly different settlement process called margins. Traditionally this has been used by large manufacturers in the agriculture and currency segments, where fluctuations in rates could decide profit or loss. The prices of these instruments closely track the underlying such as Wheat/Rice/Coffee or USDINR/USDEUR/USDAUD...

Strictly speaking, a derivative is always a financial instrument although it's underlying may be non financial instruments such as commodities or freight. A derivative is an important tool to manage price risk and if used properly is not a speculative product.

It is synthetic instrument derived from financial asset and sometimes real asset like commodities.