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Synopsis On A Study On Derivatives

This document provides an introduction to derivatives, including their definition as contracts whose value is derived from underlying assets. It discusses how derivative payments are determined by future changes in prices, indexes, or specified events. Some derivatives provide the right to buy or sell the underlying asset at a future date. The document then outlines the scope and objectives of a study on derivatives in the Indian context, focusing on futures and options trading on the Indian stock exchange. The methodology discusses collecting primary data from company staff and guides, as well as secondary data from websites, books, and journals. Limitations include time constraints and relying on secondary data sources.

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267 views5 pages

Synopsis On A Study On Derivatives

This document provides an introduction to derivatives, including their definition as contracts whose value is derived from underlying assets. It discusses how derivative payments are determined by future changes in prices, indexes, or specified events. Some derivatives provide the right to buy or sell the underlying asset at a future date. The document then outlines the scope and objectives of a study on derivatives in the Indian context, focusing on futures and options trading on the Indian stock exchange. The methodology discusses collecting primary data from company staff and guides, as well as secondary data from websites, books, and journals. Limitations include time constraints and relying on secondary data sources.

Uploaded by

arjunmba119624
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INTRODUCTION

In finance, a derivative security or derivative is a contract which specifies the right or


obligation between two parties to receive or deliver future cash flows (or exchange of other
securities or assets) based on some future event.
Another way of defining a derivative is that it is a security whose value is determined (derived)
from one or more other securities, commodities, or events. The value is influenced by the
features of the derivative contract, which may include the timing of the contract fulfilment, the
value of the underlying security or commodity, and other factors such as volatility.
The payments between the parties may be determined by the future changes of:
the price of some other, independently traded asset in the future (e.g., a common stoc)
the level of some index (e.g., a stoc index or heating!degree!days)
the occurrence of some well!specified event (e.g., a company defaulting)
"ome derivatives are the right to buy or sell the underlying security or commodity at some point
in the future for a predetermined price. If the price of the underlying security or commodity
moves into the right direction, the owner of the derivative maes money# otherwise, they lose
money. $epending on the definition of the contract, the potential loss or gain may be much
higher than if they had traded the underlying security or commodity directly.
NEED FOR THE STUDY
The turnover of the stoc exchange has been tremendously increasing from last %& years. The
number of trades and the number of investors, who are participating, have increased. The investors are
willing to reduce their ris, so they are seeing for the ris management tools.
'rior to "()I abolishing the )A$*A system, the investors had this system as a source of
reducing the ris, as it has many problems lie no strong margining system, unclear expiration date and
generating counter party ris. In view of this problem "()I abolished the )A$*A system.
After the abolition of the )A$*A system, the investors are seeing for a hedging system,
which could reduce their portfolio ris. "()I thought the introduction of the derivatives trading, as a
first step it has set up a +, member committee under the chairmanship of $r. *.-. .upta to develop the
appropriate framewor for derivatives trading in India, "()I accepted the recommendation of the
committee on may %%, %//0 and approved the phase introduction of the derivatives trading beginning
with stoc index futures.
There are many investors who are willing to trade in the derivatives segment, because of its
advantages lie limited loss unlimited profit by paying the small premiums.

SCOPE OF THE STUDY:
The study is limited to 1$erivatives2 with special reference to futures and option in the
Indian context and the Inter!-onnected "toc (xchange has been taen as a representative sample for
the study. The study can3t be said as totally perfect. Any alteration may come. The study has only made
a humble attempt to evaluate derivatives maret only in India context. The study is not based on the
international perspective of derivatives marets, which exists in 4A"$A5, -)6T etc.
OBJECTIVES OF THE STUDY
7nderstanding the derivatives maret in India.
Analy8ing the operations of futures and options.
-alculating the profit9loss position of futures buyer and seller and also the option writer and
option holder.
:ow ris management will help in derivatives.
METHODOO!Y

The following are the steps involved in the study.
To achieve the ob;ectives of studying the stoc maret data has been collected.
<esearch methodology carried for this study can be two types
%. 'rimary
+. "econdary
PRIM"RY:
The data, which is being collected for the first time and it, is the
6riginal data.
In the pro;ect the primary data has been taen from company staff and guide of the pro;ect.
SECOND"RY:
The secondary information is mostly taen from websites, boos, ;ournals, etc=


IMIT"TIONS OF THE STUDY
The following are the limitation of this study.
Time factor is the ma;or limitation
The analysi is done for only ,> days
The data has collected from the secondary source

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