How does a derivative work?

Could you please elaborate on the functioning of a derivative? I'm particularly interested in understanding its core principles and mechanisms. Could you break down the steps involved in its operation, perhaps explaining how it relates to the underlying asset? Additionally, I'm curious about the risks associated with investing in derivatives and how investors can manage them effectively. Would you also discuss the potential benefits of using derivatives in a financial portfolio? I'm keen to gain a comprehensive understanding of this financial instrument. Thank you for your assistance.