Page 217 - DCOM507_STOCK_MARKET_OPERATIONS

Stock Market Operations Tanima Dutta, Lovely Professional University

Notes Unit 11: Introduction to Derivatives

CONTENTS
Objectives

Introduction
11.1 Derivatives
11.1.1 Characteristics of Derivatives
11.1.2 Criteria for Derivatives Trading

11.1.3 Derivatives Market in India
11.1.4 Exchange-Traded and Over-the-Counter Derivative Instruments
11.1.5 Development of Derivative Markets in India
11.2 Development and Regulation of Derivative Markets in India

11.2.1 Regulatory Objectives
11.2.2 Hedging
11.2.3 Portfolio Rebalancing
11.2.4 Derivative Products

11.3 Operators in the Derivatives Market
11.3.1 Pricing Futures
11.3.2 Set of Assumptions
11.4 Myths and Realities about Derivatives

11.4.1 Indian Market is not Ready for Derivative Trading
11.4.2 The Existing Capital Market is Safer than Derivatives
11.5 Summary
11.6 Keywords

11.7 Review Questions
11.8 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the characteristics of derivatives
Discuss the criteria for derivatives trading
Elaborate the operators in the derivatives market
Discuss the myths and realities about derivatives

Introduction

The emergence of the market for derivative products, most notably forwards, futures and options,
can be traced back to the willingness of risk-averse economic agents to guard themselves against

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