Group Members Roll No.

 Mr. Sunil Yadav 1460

 Mr. Prasad More 1432
 Mr. Jagdish Sansare 1443
 Mr. Mangesh Karve 1420
 Mr. Rakesh Sharma 1445
 Mr. Aves Khan 1421
 Trading began on February 24, 1982, when the Kansas City
Board of Trade introduced futures on the Value Line Index.

 About two months later, the Chicago Mercantile Exchange

introduced futures contracts on the S&P 500 index.

 By 1986, the S&P 500 futures contract had become the second
most actively traded futures contract in the world, with over 19.5
million contracts traded in that year.

 In May 1982, the NYSE Composite Index futures contract began

trading on the New York Futures Exchange, the NYFE.
 In July 1984, the Chicago Board of Trade began trading
futures contracts on the Major Market Index (MMI).

 Dow Jones and Company went to court to block its

attempts to trade futures on the Dow Jones
Industrial Average (DJIA)

 But, in June 1997, Dow Jones and Company agreed to allow

DJIA options, futures, and options on futures to begin
trading.
 Trading in stock index futures has allegedly made the world's
stock markets more volatile than ever before.

 Critics claim that individual investors have been driven out of

the equity markets because institutional traders' actions in
both the spot and futures markets cause stock values to gyrate
with no links to their fundamental values.

 Many political figures have called for greater regulation,

going so far as to favor an outright ban on stock index futures
trading.

 Fortunately, such extreme measures have been avoided.

 A futures contract on a stock market index
represents the right and obligation to buy or to sell a
portfolio of stocks characterized by the index.

 Stock index futures are cash settled.

 That is, there is no delivery of the underlying stocks.
 The contracts are marked to market daily.
 On the last trading day, the futures price is set equal to
the spot index level and there is a final mark to market
cash flow.
 Agricultural (CBOT, NYBOT, NCDEX, MCX)
 Energy (Nymex, NCDEX & MCX
 Metals (CBOT)

INDIVIDUAL EQUITY FEATURES

2001- Single Stock Features
 First index features – 1982

CURRENCY FUTURES

First currency features - 1972

 Invoice amt= contract size * futures settlement
price * conversion factor + accrued int.
 Accrued Int.= (coupon/2)*(No. of days since last
coupon payment/No. of days in a coupon period)
 Conversion factor= present value at 6% yield of
the delivered bond per $1 of per value
The Eurodollar futures contract is based on a 3-
month Libor with a national value of $1 million.
A one basis point change in the int. rate,
therefore, affects the contract valued by
0.01*1%*1/4*$1000000=
1/10000*1/4*$1000000=$25
 An index is, in one sense, just a number that is computed in
order to measure the value of a portfolio of stocks.
 Other indices have been constructed to track the values of other
types of securities, such as bonds and futures.
 Still other indices track such economic indicators as the consumer
price index (CPI) or the index of leading indicators.

 When constructing a stock market index, three issues are of

particular interest:
 which stocks are in the index
 how each stock is weighted
 how the average is computed

We will describe three different stock market indices.