Page 191 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Derivatives & Risk Management

Notes Self Assessment

State the following are true or false:
1. Futures are useful to the market participants only if futures prices reflect information
about the prices of the underlying assets.

2. According to L C Gupta Committee Report on Derivatives, at the time of introduction of
Derivatives Contracts on any underlying the value of the contract should be at least ` 1
lakhs.
3. The maximum brokerage chargeable by a trading member in relation to trades affected in
the contracts admitted to dealing on the F&O segment of NSE is fixed at 1.5%of the contract
value in case of index futures and stock futures.
4. The transaction charges payable to the exchange by the trading member for the trades
executed by him on the F&O segment are fixed at the rate of ` 2. per lack of turnover
(0.002%) subject to a minimum of ` 1, 00,000 per year.
5. The trading members contribute to investor protection fund of F&O segments at the rate
of ` 10 per corer of turnover (0.0001%).

14.2 Setting of Risk Vision

Risk Vision is central to a financial institutions risk management function providing a consolidated
view of risk exposures across multiple systems, incorporating both the trading and banking
book. Risk Vision delivers:

1. Real-time trade approval to maximise market opportunity with pre-deal checks in 0.100
seconds
2. Accurate analysis of exposure across multiple scenarios in real-time

3. Ease & low cost integration due to open & flexible API
4. Single view of exposure across operations to support efficient & accurate capital allocation
5. Data Warehouse for aggregating data from multiple systems for a central store in a
consistent format.
Risk Vision supports accurate pricing of numerous trade types, accurate exposure measurement
and risk management measures like Value at Risk and Economic Capital. Risk Vision also has
various decision support tools like ‘what-if’ analysis, scenario stress testing and sensitivity
analysis.

Risk Vision uses state of the art risk estimation techniques like Monte Carlo, historical
simulations and parametric approaches. The Risk Vision suite also includes a highly flexible
and advanced ‘Exposure and Limit Management’ module which is fully integrated with the risk
calculation engine. A uniquely flexible solution, Risk Vision is focused on supporting value
management and regulatory compliance within a global financial institution through accurate,
real time identification, measurement and control of exposure and capital.

Self Assessment

Fill in the blanks:
6. ………….is central to a financial institutions risk management function providing a
consolidated view of risk exposures across multiple systems, incorporating both the trading
and banking book.

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