Most institutions use derivatives so they can do something risky, make a lot of money, and lay off some of the risk and profit to someone else. Use of derivatives are excellent vehicles as long as markets remain in "normal" conditions. Normal means within 2 std deviations of past behavior. The US banks have deravatives totalling over 100 trillion dollars (that is trillion with a t) in notional value. Long term capital management tried this in 1998 and almost blew up the world's financial system because their models did not include russian debt default and the asian currency crises as possiblitilties. A lot of these derivatives are outside normal conditions and are possibly ready to blow up. If I'm scaring you, I'm already scared.
This is as good a time to take a look at what you have, family probably, a reasonably secure job probably, no great amount of credit card debt probably. We should not be afraid of this. If we stay calm and lucid we can survive anything except asteroid 2002 NT7.
We have nothing to fear but fear itself. Somebody said that, but it was before my time. Got a recipe for sawdust bread?