A Study on Futures and Potions

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A STUDY ON FUTURES AND POTIONS

Project submitted in partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION

DECLARATION

I hereby declare that this Project Report titled, “A STUDY ON THE DERIVATIVES” submitted by me to the Department OF BUSINESS ADMINISTRATION, XXXX and is a bonafide work under taken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before.

Name and Address of the StudentSignature of the student

Date :

ACKNOWLEDGEMENT

I wish to express my sincere deep sense of gratitude and also thank my guide XXX, Faculty of Finance for his significant suggestions and help in every aspect to accomplish the project work. His persisting encouragement, everlasting patience and keen interest in discussions have benefited me to the extent that cannot be spanned by words.

I take my pleasure to acknowledge XXXX for the facilities provided and constant encouragement. Finally I express bows to everyone who are involved with this project.

CONTENTS

INTRODUCTION

METHODOLOGY

1 FUTURES

2 OPTIONS

ANALYSIS OF THE STUDY

SUMMARY AND CONCLUSIONS

BIBLIOGRAPHY

INTRODUCTION

Nature of the problem:

The turnover of the stock exchanges has been tremendously increasing from last 10 years. The number of trades and the number of investors, who are participating, have increased. The investors are willing to reduce their risk, so they are seeking for the risk management tools.

Prior to SEBI abolishing the BADLA system, the investors had this system as a source of reducing the risk, as it has many problems like no strong margining system, unclear expiration date and generating counter party risk. In view of this problem SEBI abolished the BADLA system.

After the abolition of the BADLA system, the investors are seeking for a hedging system, which could reduce their portfolio risk. SEBI thought the introduction of the derivatives trading, as a first step it has set up a 24 member committee under the chairmanship of Dr.L.C.Gupta to develop the appropriate regulatory framework for derivative trading in India, SEBI accepted the recommendations of the committee on May 11, 1998 and approved the phased introduction of the derivatives trading beginning with stock index futures.

There are many investors who are willing to trade in the derivative segment, because of its advantages like limited loss and unlimited profit by paying the small premiums.

IMPORTANCE OF THE STUDY:
To evaluate the profit/loss position of option holder and option writer.

OBJECTIVES OF THE STUDY:

❖ To analyze the derivatives market in India.
❖ To analyze the operations of futures and options.
❖ To find out the profit/loss position of the option writer and option holder. ❖ To study about risk management with the help of derivatives.

SCOPE OF THE STUDY:

The study is limited to “Derivatives” with special reference to futures and options in the Indian context and the Hyderabad stock exchange has been taken as a representative sample for the study. The study can’t be said as totally perfect. Any alteration may come. The study has only made a humble attempt at evaluating derivatives market only in Indian context. The study is not based on the international perspective of derivatives markets, which exists in NASDAQ, NYSE etc.

LIMITATIONS OF THE STUDY:

The following are the limitations of this study.
❖ The scrip chosen for analysis is STATE BANK OF INDIA and the contract taken is March 2005 ending...
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