Module-01

Dete
Poge
Derivativs:
Financial deivatives:
Derivativy dt is a troduble productcontracl
Jhey yinancical contract:
are dhat deoivesits value Tom an
ohOAe valu is deperdent on Undeslying anet. Jhe undralying set
an undevtqing 'anet | qroup CCn be stochs: currencies, (ommod:ties
tommonly usedi 4 even int vest ates.
|O ašxets.Jhe indices
, , + Jhe vaue Undes lying oset chongen
changen
anets aTe stocks bonds
,
tuTTenies tommodties oith the manhet movemenb.
mcrs
het indices: s dtt
Iypes nancial drivahver:
Features o deivaives
) Riak manaqemert Commodity derivatives
al Snvertmert strateqies * tommot {orar ds
3)l Masket Eiieny -lommodity tutuses optins

5)
Price discovery &) Equti dezivatves i
) Dive7S{1cahmn * Equity F40
1)marlsetnisk t, Index F¢0
to Equily &aps
TYpes of clasiica hm oj dezivahv
3) 0Te
traded dezvoives
. )Finanial ): ommodiiu H} Exchange draded deivativer
Bašrc! * Complex ! 5) Debt derivctivy
+ nterest rate 40ORIds
FoThCTds Snaps in
Futuzes ifkExotic6(
Ophions ii lNon stañdasd) *ntrest vore shopS
oWarants 3* :6) tumenty dertvatives .su
Y Cuorency F40
 Types o! FD istuments a) (ash basi
) Fuuves tontract -
-1 Jhe buyes Still.makes ihe payment
Q) Foonavds tontac+ on the s ettumentdate but no
ayett
3) Dpions Contract charge hand. Jhis payment amount
4)Skaps -Contcct i6 detevnined by the dijene blu
the zwrent spot prite f 40B prie
aTd price.
Fo7IOad tontact
Adhantaq
Contruct blo tio pavtts tD ) High 'degree o tustorisaion
|buy] 6ell an aset at a e) NÖ mangin Tequlment
Bheciied rmiu at a foed pata

jin the gutare. Risks involved in 40OKADd tontracts

) Cotritev paroty ish
e) poDCe 0 gosKard tontsact a) No regulat

E 3) High volatile manket

) Leading beverage. co,
a) Forard tontact 0utuze aLontzacb
3) Coyeeestate t 8tandavdized contrcct blo
1,000 kq toffu beons txpert ohese both urties ague to
4)
tD pazhes
5)
3 monthi span e #me buy 4 ell -at a particulars dyet a
Spectc quanhty 4 at a qredetmi nd
ice at a specijed- date in jutuze.
Setlement
)Delive bcusis geatuse
- Jhe seller must transe the ) Oranisedexchonqe
Undeslying asets to the
buyes, Then buye pays the :
3) Cleasing house
H)
Masqini
6) Manhing to maskt
b) dctual delvey Ùò
Tate
 Date
Prre

guuses (ontiact
Advantaqes 9 tally '
t cive "the the Tigbt
buyey

tbllaotn to buy a given

)Cpens the manhets to mveitos but no1 he

o) S1able mangin Tequirements quantiHy a the Undeslying anet, at

ot a
3)
No time delay u given yutane date.
grvn priu on | beyoue
H)
igh liguidity
6) Simple
giting'! 2 putn the buyes the right
44 qive
o sell cr
)li protectein
6)
against
ia lutuitin but nhi
not -ht
he Dbltgctin
bbliqcatim qiven
1) Hedonq qainst {utuve vislei" quontity y the undevlyng aeiane1
. ta
9iven priu ]beore a n
givein dite
Disadvantoge Ot 4utaý eonhat
t N (cndool sves 4ulre tvents Spops
) Levvägt issues They derivahves totsart
ave
3)Erpiation doies kohese tu0 pastles exchange their

tnoncial Dbliqahmu. Jhe cush flows

5) Liquidiy nuh ase based on a not onal inipal
f 6)| Settlmeni 4 delivey Tùh amount igvee d bju Both he panhes
Uprnational isk oithout exchange f pinapal.
Typet- ) srtrvest nate &haps
Settlument ) tuovenc áNaps
) CloROut.
2 Physital deivesy featurses q
devivatives mazket
3) ash cHement t
) Rish manágmerrt Io) Speula fion

2)Capial eKcency ) Types devivahve

(3) Optiong Contocto 3) edging -1a).undealying axeto
Jt mst tmp pat
is the H) Liquidity 13)
Settment
04 deoivcatrves tortvati
ontaa ct giyes the qicht
n
tontTact sn Dpim
bptiom (
an
5) 4eencq
but not 6) Levaage
bjiqafento buyl aeil the undesly ing
Mets. ThJO types!- ) call 8) Dpen intvest
2) put
pie dixovy
 Functions 04-Devivative maskoti Disadvantaqu o dezivahiyes

)priu dicovey e 0:FoiesVolatliHy

2) High bankuptcùs
3) Tnereuu need a Tequlatiomt
H) Reduce masket transacthiom ces t H) ountes parl Túk!
tn5)fnancal: erngineesing }is
dyt 5) Lost D4 holding Undeslçinq' anets
it
si B) Liquldity enhanument 6)thohg! in' cmoünt a tim to expivoahy
)-thangt
)Sinstive cemand f sapply
0

4 imvesiment
8|Spetùlattn
Oppotunitus hu do investov66 cho0se FD
)protecton -aqaios1 maskei vòlatlty
Needo dezivati ves
miket ) rbrtcucye Dtbostunitits:
mos beto
OCnsso Tisk 3) Auen Yotyennt At
H)park suTplus yunda
i Hquidityisk is)
Mnket riSkaui lFactor6 contoibuting GroLolK. by duivatve
Dpoive volatlity' Irrg",ir
o) T0 hedejesth ) Globatiration Mas kit,
3) | To 8peculate is (e. Techmologiccul Gldvanu
|9)
H) Cicumyenting vequla tions ldvances tn ineneial tories
5) Minimizing trade ttS.
Exchange traded vš oT
Aovantaqs o deoi vahveg t) Centtlizotim D4
masket
9) Stcmdcrsdizotien
) tedqing visk txpesurve
priu diCDVGY
Ibck in prites 1iYn01 H)
Visibill4: !
H)
Risk doangt 5) pastieu: imvbved i tin
6) evroage i kt

ayeTo
8) Acceys t0 tInavaitatle Magken
 Tradeas in dezivoti) ves mcket
1) Dealevs

a)
Speulatoss

Coitiques dezivatlves
Dy

h) Speculative 4qambling mobiver

Ancrease Tish
3 )l Instabi lNy o
Fs
H)priu -instabrlity
5) DisplaLemint Reet
Snerecuedequlatny burd

Detivati ves mosket in Jndia

Equity
) tommodt

derivcihves mapkt
t Pavticipanb in
) Bookesiucar
Masket makers 4 jobbers
3 Ercharnqe
H)choning house
5 tustodan /Ge hose
umd
6) Bonk Jn omesosk
Rkpulatony
 Digeoence yonO8d 4 utures (onttact
60 jeaKd
Bagis, Futuves (ontsart fonusd tontact :

|Meaning teemer blw

lpeoties to buy 4 se) thehe prties ague to ixchang
endealying xet at Aecy;ed
| the Cret for cah at a t d
Datt cqreed ate in pore 4 cat qutuse d'te.
tutuse.

Stouctse Standordud contract lustom:zd (onnott"

Maoket sbPrinasy ffecondasy
A)Coutes party
tigh
Stcnderochzed)
ired Cutomzed depends on Conhact tenm
Regulation Stck exchonge Sely"requlated
) GuDrantees Both parlics must deposit NO guaantte of setlment
an initial quavantee (macin) Unt the date c matuity only

ion. hefoskaTd prie.

(ollaieval Tnitial mangin requed Mol TeQuird
) Setlarment
dail baso matusity dale
(0) nstHu kional tlocoing house contiacting pantiès
Guavants
DejauH mD Buch prDbabilHy High de-outt
on
(2 hoded Uranized stock exchange DvT thecoutes ies theTe is no
Betonday maake
mehoda OppesHe tontratt on Ogpest tothart oith sams
the exchang tobnterpasty
pupase prevend les thoough Maundy hare speculatve
hedging