A look at financial derivatives in India
Summary :
Table of Contents
- Introduction
- Foreword
- Preface
- Introduction of derivatives
- Research methodology
- Derivatives described
- Types of derivatives
- Forward contract
- Future contract
- Option contracts
- Analysis and data interpretation
- Conclusion
- Annexures
- Bibliography
Abstract
The derivatives markets has existed for centuries as a result of the need for both users and producers of natural resources to hedge against price fluctuations in the underlying commodities. Although trading in agricultural and other commodities has been the driving force behind the development of derivatives exchanges, the demand for products based on financial instruments-such as bond, currencies, stocks and stock indices-have now far outstripped that for the commodities contracts. india has been trading derivatives contracts in silver, gold, spices, coffee, cotton and oil etc for decades in the gray market. Trading derivatives contracts in organized market was legal before Morarji Desai's government banned forward contracts. derivatives on stocks were traded in the form of Teji and Mandi in unorganized markets. Recently futures contract in various commodities were allowed to trade on exchanges. For example, now cotton and oil futures trade in Mumbai, soybean futures trade in Bhopal, pepper futures in Kochi, coffee futures in Bangalore etc.In June 2000, National Stock Exchange and Bombay Stock Exchange started trading in futures on Sensex and Nifty. Options trading on Sensex and Nifty commenced in June 2001. Very soon thereafter trading began on options and futures in 31 prominent stocks in the month of July and November respectively. derivatives are financial contracts whose value/price is dependent on the behavior of the price of one or more basic underlying assets (often simply known as the underlying). These contracts are legally binding agreements, made on the trading screen of stock exchanges, to buy or sell an asset in future. The asset can be shares, index, interest rate, bond, rupee dollar exchange rate, sugar; crude oil, soybean, cotton, coffee and whatever have you.
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