Page 28 - DMGT513_DERIVATIVES_AND_RISK_MANAGEMENT

Unit 2: Evolution of Derivatives in India

Index Futures: Index futures mean a future contract on a stock or financial index. For each index Notes
there may be a different multiple for determining the price of the futures contract.
SCRA: The Securities Contracts Regulation Act.

SEBI: Securities and Exchange Board of India.
Speculators: Speculators include those who willing to absorb risk of hedgers for a cost.

2.7 Review Questions

1. Discuss the evolution of derivatives trading in India.
2. What are the key regulatory guidelines issued by SEBI for derivative trading?

3. State the difference between hedgers and speculators.
4. Arbitrage is the process of simultaneous purchase of securities or derivatives in one
market at a lower price and sale thereof in another market at a relatively higher price.
Discuss.
5. Write a note on organisation and functioning of derivatives in India.
6. The objective of hedgers is to safeguard their existing positions by reducing the risk.
Discuss.
7. Why is it necessary to regulate the derivative market?
8. Is there any difference between derivative trading and equity trading? Discuss.

Answers: Self Assessment

1. June, 2000 2. BSX

3. Options 4. November 2001
5. Pre-arranging 6. United States
7. 40% 8. 50

9. ` 2 lakh 10. False
11. False 12. True
13. Screen based 14. Investor Protection Fund
15. Electronic Funds Transfer (EFT)

2.8 Further Readings

Books Apte, P.G., International Financial Management, Tata McGraw-Hill Publishing

Avadhani, V.A. : Securities Analysis and Portfolio Management.
Avadhani, V.A. : Capital Market Management.
Avadhani, V.A. : Investments and Securities Markets in India.
Bhole, L.M. : Financial Institutions and Markets.

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