Nrr Final Ppt

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DERIVATIVESDERIVATIVES

(FUTURES&OPTIONS)(FUTURES&OPTIONS)

BYBY

N RAKESHN RAKESH


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INTRODUCTIONINTRODUCTION

Derivative is a product whose value is derived fromDerivative is a product whose value is derived from

the value of one or more basic variables, calledthe value of one or more basic variables, called

bases (underlying asset, index, or reference rate), inbases (underlying asset, index, or reference rate), ina controlled manner. The underlying asset can bea controlled manner. The underlying asset can be

equity, forex, commodity or any other assetequity, forex, commodity or any other asset

A contract which derives its value from the prices,A contract which derives its value from the prices,

or index of prices, of underlying securities.or index of prices, of underlying securities.


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REVIEW OF LITERATUREREVIEW OF LITERATURE

The emergence of the market for derivative products, mostThe emergence of the market for derivative products, mostnotably forwards, futures and options, can be traced back tonotably forwards, futures and options, can be traced back tothe willingness of riskthe willingness of risk--averse economic agents to guardaverse economic agents to guard

themselves against uncertainties arising out to fluctuations inthemselves against uncertainties arising out to fluctuations inasset prices.asset prices.

Through the use of derive active product, it is possible toThrough the use of derive active product, it is possible topartially or fully transfer price risks by lockingpartially or fully transfer price risks by locking--in asset price.in asset price.As instruments of risk management, these generally do notAs instruments of risk management, these generally do notinfluence the fluctuations in the underlying asset prices.influence the fluctuations in the underlying asset prices.However, by lock8ngHowever, by lock8ng--in asset prices, derivative productsin asset prices, derivative productsminimize the impact of fluctuations in asset prices in assetminimize the impact of fluctuations in asset prices in asset

prices on the profitability and cash flow situation of riskprices on the profitability and cash flow situation of risk--averse investors.averse investors.


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Derivatives are risk management instruments, which deriveDerivatives are risk management instruments, which derive

their value from on underlying asset. The underlying assettheir value from on underlying asset. The underlying asset

can be bullion, index share, bonds, currency, interest etc.can be bullion, index share, bonds, currency, interest etc.

Annual turnover of the derivatives is increasing each yearAnnual turnover of the derivatives is increasing each year

from 1986 onwards,from 1986 onwards,

Year Annual turnoverYear Annual turnover

1986 146 millions1986 146 millions

1992 453 millions1992 453 millions1998 1329 millions1998 1329 millions

2002&2003 it has reached to2002&2003 it has reached to

equivalent stage of cash market.equivalent stage of cash market.


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OBJECTIVESOBJECTIVES

To study the various trends in derivativeTo study the various trends in derivativemarket.market.

To study the role of derivatives in IndianTo study the role of derivatives in Indianfinancial markets.financial markets.

To study the in detail role of futures andTo study the in detail role of futures andoptions.options.

To find out profit/loss position of the optionTo find out profit/loss position of the optionwriter and option holder.writer and option holder.


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SCOPESCOPE

Institutional participation in Derivatives is limited in spite ofInstitutional participation in Derivatives is limited in spite ofa huge turnover level in this segment. This phenomenon isa huge turnover level in this segment. This phenomenon isindeed surprising but true.indeed surprising but true.

The Finance Ministry and the Government were initially ofThe Finance Ministry and the Government were initially ofthe view that derivatives would be dominated by institutions.the view that derivatives would be dominated by institutions.However, the reverse has happened.However, the reverse has happened.

It is the retail crowd with the High Net Worth individualsIt is the retail crowd with the High Net Worth individualsand the broking proprietary positions that has dominated theand the broking proprietary positions that has dominated theDerivatives segment in India completely unlike theDerivatives segment in India completely unlike thedeveloped markets where institutional participation is thedeveloped markets where institutional participation is thekey driver of these markets.key driver of these markets.


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SOURCE OF DATASOURCE OF DATA

The data collected and used for the study is of two typesThe data collected and used for the study is of two types

PrimaryPrimary

SecondarySecondary

PrimaryPrimary::

The data which is being collected for the first time and it is theThe data which is being collected for the first time and it is theoriginal data.original data.

SecondarySecondary::

The secondary information is mostly taken from websites,The secondary information is mostly taken from websites,books, journals, newspapers etc,.books, journals, newspapers etc,.


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LIMITATIONSLIMITATIONS

The limitation of the study is only to thisThe limitation of the study is only to thisstudy of Derivatives.study of Derivatives.

All the details couldnt be extracted as theAll the details couldnt be extracted as thecompanies will be having the rule ofcompanies will be having the rule ofconfidentiality.confidentiality.

The number of working days for the projectThe number of working days for the projectis limited to 45 days.is limited to 45 days.

So the information extracted is limited.So the information extracted is limited.


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CONCLUSIONCONCLUSION

Derivative is a product/contract which does not have anyDerivative is a product/contract which does not have anyvalue on its own i.e., it derives its value from somevalue on its own i.e., it derives its value from someunderlying. As the name suggests, derivative contracts areunderlying. As the name suggests, derivative contracts are

those contracts which derives their value from the price ofthose contracts which derives their value from the price ofsomething else. Typically derivative contracts derive theirsomething else. Typically derivative contracts derive theirvalue from underlying cash market.value from underlying cash market.

Derivatives are the investments that derive their fromDerivatives are the investments that derive their fromunderlying assets such as currencies, treasury bills, andunderlying assets such as currencies, treasury bills, and

bonds or are linked to indices such as a stock market indexbonds or are linked to indices such as a stock market indexthat can be used to speculate on market movements or tothat can be used to speculate on market movements or to

protect investments against major swings in market prices.protect investments against major swings in market prices.


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BIBLIOGRAPHYBIBLIOGRAPHY

TITLE OFTITLE OF

BOOKBOOK

AUTHORAUTHOR PUBLISHERPUBLISHER

FINANCIALFINANCIALINSTITUTIONS&MARKINSTITUTIONS&MARK

ETSETS

MEIR KHANMEIR KHAN OXFORD UNIVERSITYOXFORD UNIVERSITY

FINANCIAL MGMT 2FINANCIAL MGMT 2NDND

EDITIONEDITION

PRASANNA CHANDRAPRASANNA CHANDRA TATA MAC GRAW HILLTATA MAC GRAW HILL

FINANCIAL MARKETSFINANCIAL MARKETS

& SERVICES& SERVICES

GORDAN & NATRAJANGORDAN & NATRAJAN TATA MC GRAW HILLTATA MC GRAW HILL

S A P MS A P M DONALD E FISCHER &DONALD E FISCHER &

RONALD R JORDENRONALD R JORDEN

PRENTICE HALL OFPRENTICE HALL OF

INDIAINDIA

DERIVATIVES COREDERIVATIVES CORE

MODULE WORKBOOKMODULE WORKBOOK

ADVISORS OF NSEADVISORS OF NSE NSE PRESSNSE PRESS


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WEBSITES:

www.derivativesindia.com

www.sebiindia.com

www.indiabulls.com

www.nseindia.com

www.bseindia.com

www.5paisa.com

NEWS PAPERS:

The Economic Times

Business Line.

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