Page 189 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Derivatives & Risk Management Dilfraz Singh, Lovely Professional University

Notes Unit 14: Management of Derivatives Exposure

CONTENTS
Objectives
Introduction
14.1 Nature of Derivative Trading

14.2 Setting of Risk Vision
14.3 Reasons for Managing Derivatives Risk
14.4 Types of Risks in Derivative Trading

14.5 Futures and Options Trading Systems
14.6 Basics of Trading
14.6.1 Parties of a Trading System
14.6.2 The Market Watch Window
14.6.3 Inquiry Window

14.6.4 Placing Orders on the Trading System
14.6.5 Market Spread/Combination Order Entry
14.6.6 Basket Trading

14.7 Summary
14.8 Keywords
14.9 Review Questions
14.10 Further Readings

Objectives

After studying this unit, you will be able to:

 State the nature of derivative trading
 Discus the setting of risk vision
 Describe the reasons for managing derivative risk

 Identify the types of risks in derivative trading
 Describe future and options trading system
 State the basis of trading

Introduction

A future trading is an important economic activity for the development of an economy. Being
the first form of derivatives trading, it is a specialized field which requires professional expertise
and adequate knowledge in this area. To be a successful market operator (as a speculator,
arbitrageur, trader, investor or hedger) one must have adequate information and proper

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