Derivatives are legally binding agreements made on the trading screen of stock exchanges, to buy or sell an asset in future. A derivative by itself does not constitute ownership, instead it is a promise to convey ownership. Derivative contracts are traded both on established exchanges like NSE, Chicago Board of Option Exchange and OTC ETD.
Derivatives are legally binding agreements made on the trading screen of stock exchanges, to buy or sell an asset in future. A derivative by itself does not constitute ownership, instead it is a promise to convey ownership. Derivative contracts are traded both on established exchanges like NSE, Chicago Board of Option Exchange and OTC ETD.
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Derivatives are legally binding agreements made on the trading screen of stock exchanges, to buy or sell an asset in future. A derivative by itself does not constitute ownership, instead it is a promise to convey ownership. Derivative contracts are traded both on established exchanges like NSE, Chicago Board of Option Exchange and OTC ETD.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online from Scribd
the price of one or more underlying assets. V These contracts are legally binding agreements made on the trading screen of stock exchanges, to buy or sell an asset in future. V A derivative by itself does not constitute ownership, instead it is a promise to convey ownership. V Rnderlying securities for derivates are: V Commodities (grain, coffee, pepper, potatoes, etc.,) V Precious metals (gold, silver, etc.,) V Short term debt securities (treasury bills) V Interest rates V Common shares V It includes forwards future contracts, options and swaps V Common underlying assets includes interest rates, exchange rates, commodities, stocks and bonds V The two most common type of derivatives are future and options V It has one or more underlying assets V Requires negligible initial investments compared to other types of financial contracts V Should provide for net settlement V Derivative contracts are traded both on established exchanges like NSE, Chicago Board of Option Exchange and OTC ETD (Exchange Traded Derivatives) Ȃ V Derivatives traded on the regulated exchanges are highly standardized. V The parties to the contracts do not decide the terms of the contracts. V It offers maximum protection to the investors. OTC (Over The Counter) - V It encompass tailored financial derivatives such as swaps. V Traded in the offices of the worldǯs leading financial institutions. V These contracts are customized (the term of OTC contracts are individually agreed between two counter parties). V orward Contracts V uture Contracts V Options V Swaps V Interest Rates Swaps V Currency Swaps V Trading derivative contracts were legal before 1977. V In June 2000, NSE and BSE started trading in futures on Sensex and Nifty. V Option trading commence in June 2001. V Discovery of prices V Transfer of Risk V Liquidity and Volume Trading V Trading Catalysts V (edgers V Speculators V Arbitragers V It is an agreement between two parties to buy or sell underlying assets at a predetermined future date at a price agreed when the contract in two. V They are not standardized products V They are OTC derivatives that are tailored to meet specific user needs. V The underlying assets of this contract includes: V Traditional agricultural or physical commodities. V Currencies ( forwards) V Interest rates (forward rate agreements or RAs) orward contracts in India is broadly governed by the orward Contracts (Regulations) Act, 1952. V (edge contracts V Transferable specific delivery forward contract V Non-Transferable specific delivery forward contract