Risk is a characteristic feature of all commodity and capital markets. The emergence of derivatives market is an inventing feat of financial engineering that provides an effective and less costly solution to the problem of risk that is embedded in the price unpredictability of the underlying asset. Financial derivatives are used for a number of purposes including risk management, hedging, simultaneous buying and selling of securities, currency, or commodities in different markets, and speculation. Derivatives are an increasing important feature of financial market worldwide which ranges from simple forward contracts to complicated options product. Buying the new derivative is the functional equivalent of selling the first derivative, as the result is the elimination of risk. The objective behind study is to establish the relationship between price of derivative instrument and factors affecting it. A derivative is a financial instrument which derives its value from the value of underlying entities such as an index, interest rate or assets like commodities, stocks, bonds, interest rates and currencies. By analysing the data, we get some basic idea about derivative market, Future prices, Option Premium, Strike Price, factors affecting such prices etc. This article describes the evolution of Indian derivatives markets, the popular derivatives instruments, and the main users of derivatives in India. The model has been established, which indicates weightage of different factors on price of derivative instrument. With the help of the model, we can predict price of derivative instrument which will be helpful to participants of derivative market.