21-11-2012, 01:03 PM
INTRODUCTION TO FINANCIAL DERIVATIVES
Introduction_to_Derivatives.ppt (Size: 665.5 KB / Downloads: 37)
Introduction
Derivatives are synthetic instruments
They derive value from an underlying asset class
Asset classes range from financial instruments to commodities.
Common underlying theme of derivatives is that they are leveraged products.
Factors Driving The Growth Of Derivatives
Increased volatility.
Increased integration with the international
markets.
Development of more sophisticated risk management tools.
Derivative Positions and Participants
Naked open position taking a directional call on the markets
Hedge against underlying asset class
Arbitrage position within an asset class
Speculators
Hedgers
Arbitrageurs
Underlying Asset Class
Asset classes: financial which includes currencies and commodities
Financial asset classes: Interest rates, equities and currencies
Commodities range from agricultural commodities to minerals and metals
Derivatives in India
The structured derivative market in India is relatively new (about 10 years old)
However derivatives have caught the fancy of the market and exchange traded equity and commodity derivatives are vibrant.
Equity Derivatives in India
Nifty index futures are the highest traded contracts
Single stock futures are actively traded for arbitrage
Nifty index options are also traded actively
Single stock options do not trade actively