21-08-2012, 11:30 AM
RISK MANAGEMENT WITH DERIVATIVES
RISK MANAGEMENT.doc (Size: 135 KB / Downloads: 35)
Introduction
Indian Derivatives Market
Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2001. SEBI permitted the derivative segments of two stock exchanges, NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivatives contracts. To begin with, SEBI approved trading in index futures contracts based on S&P CNX Nifty and BSE–30(Sensex) index. This was followed by approval for trading in options based on these two indexes and options on individual securities.
Findings
- Only 71% investors are trading in Derivatives Segment out of 29 investors surveyed and 29% are trading in Cash Segment.
- Mostly investors are not trading in Derivatives Segment due to lack of guidance & awareness (No. of respondents are 8 & 10 respectively) and some of the investors are likely to get long term gain like dividend.
- Most of the investors are trading in Derivatives with both the segment i.e. Futures and Options (No. of respondents are 29) rather than in one segment alone and only few are trading with commodities segment.
- More than 50 % investors are trading in Derivatives Segment due to Less Funds are required. Only few are trading because of Risk management with less funds and price discovery.
- Only 15 investors are aware about the Risk Management Strategies available in the Derivatives Segment while rests of the investors are trading because of other reasons.
- Those investors are aware about the Risk Management Strategies; mostly they are using only Hedging and Hedging with Arbitrage Strategies while none of the investors using Arbitrage Strategy alone
- Most of the investors are using the Risk Management Strategies through both the instruments i.e. Index & Scrip while others are preferring particular scrip rather than index.
Conclusion
1 Investors are trading in derivatives segment for the purpose of less funds and they are mostly prefer both the Futures & Options.
2 Very few people are familiar with Risk Management Strategies and they prefer either Hedging or both Hedging & Arbitrage at a time.
3 The frequency of using strategies is occasionally with the help of Index & Scrip.
4 Most of investors are prefer to use the strategies at the time of Corporate Results declared, Budget Announcement, and Merger & Acquisition.
5 Most of the investors are satisfied with the strategies to manage the risk, so we can say that the strategies are really hedge the risk or increases the chances of reducing the risk.