BASICS OF

DERIVATIVES

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 BASICS OF DERIVATIVES

CONTENTS
FOREWORD ...................................................................................................................... 3

1.INTRODUCTION .......................................................................................................... 5

2. FUTURES .................................................................................................................... 11

3. OPTIONS ..................................................................................................................... 26

4. TRADING STRATEGIES USING FUTURES AND OPTIONS ........................... 40

5. RISK MANAGEMENT IN DERIVATIVES............................................................ 50

6. SETTLEMENT OF DERIVATIVES ........................................................................ 52

7. REGULATORY AND TAXATION ASPECTS OF DERIVATIVES.................... 57

8. CASE STUDY- WHEN THINGS GO WRONG!..................................................... 58

ANNEXURE 1-GLOSSARY OF TERMS USED IN DERIVATIVES ...................... 63

ANNEXURE 2- GROWTH OF DERIVATIVES MARKET IN INDIA ................... 72

ANNEXURE 3- BLACK AND SCHOLES OPTION PRICING FORMULA .......... 74

ANNEXURE 4- L C GUPTA COMMITTEE REPORT ............................................. 75