Report on Financial Derivative
Project Report on Derivatives | Introduction to Futures & Options | Faculty: Dr. Sharif N. Ahkam
1.0INTRODUCTION
In recent times the Derivative markets have gained importance in terms of their vital role in the economy. The purpose of this report to get an orientation to the derivatives and develop a basic understanding of what it is and how does it work.
Derivatives are financial instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest, etc. Derivatives are likely to grow even at a faster rate in near future.
The emergence of the market for derivatives products, most notably futures and options, can be tracked back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative product minimizes the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors.
However, the use of F&O has grown into other segments like leveraged trading and arbitrage.
2.0 OBJECTIVES OF THE REPORT:
To get a basic understanding of what these instruments are and how are these instruments used in the financial market.
3.0 WHAT AREDERIVATIVES:
Derivatives are financial instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest etc. For example, equity futures and options are derived from equities in the underlying share market Example:
In India, there is a
1.0INTRODUCTION
In recent times the Derivative markets have gained importance in terms of their vital role in the economy. The purpose of this report to get an orientation to the derivatives and develop a basic understanding of what it is and how does it work.
Derivatives are financial instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest, etc. Derivatives are likely to grow even at a faster rate in near future.
The emergence of the market for derivatives products, most notably futures and options, can be tracked back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative product minimizes the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors.
However, the use of F&O has grown into other segments like leveraged trading and arbitrage.
2.0 OBJECTIVES OF THE REPORT:
To get a basic understanding of what these instruments are and how are these instruments used in the financial market.
3.0 WHAT AREDERIVATIVES:
Derivatives are financial instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest etc. For example, equity futures and options are derived from equities in the underlying share market Example:
In India, there is a