Now-a-days, the financial derivatives have become increasingly popular and most commonly used in the world of finance. This has grown with so phenomenal speed all over the world that now it is called the derivatives revolution. With the introduction of financial derivatives, the trading strategies adopted by the investors is changing it reduces the risk and achieve more profits from the investment. The derivative trading, today, has become a powerful segment of the international financial markets. In the last two decades, trading in various equity derivatives have begun at different centres of global financial markets. Numerous overseas centres have developed their own derivatives markets, and as such the global derivatives market has become a reality of this time. No doubt the derivatives are powerful tools for risk management but they might turn out to be disastrous weapons if not used properly. Against this background, the present paper attempts to study the role of derivatives in financial risk management in Indian context.