Derivatives management in India
Summary :
Table of Contents
- Introduction
- What is making money in the market?
- What is dividend arbitrage?
- Modern theory
- The arbitrage between the NIFTY spot and the index futures market
- An overview of exchange traded funds
- Market situation: analysis
- Underlying shares of Global Depository Receipts (GDRs) or American Depository Receipts (ADRs)
- Conclusion
Abstract
One of the greatest rules of making money in the market is to buy low and sell high. No matter what one does, this rule underlies all investments made in any market, be it product or capital. From this rule stems one of the greatest modern means of making money: Arbitrage. The concept, as such, is quite a simple one: If the price of the same asset is different in two markets, there will be operators who will buy in the market where the asset sells cheap and sell in the market where it is costly. This activity termed as arbitrage, involves the simultaneous purchase and sale of the same or essentially similar security in two different markets for advantageously different prices (Sharpe & Alexander 1990). So, you end up buying low and simultaneously selling high in a different market, thus, creating an opportunity to make money.
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