DERIVATIVES

- A REPORT

SUBMITTED BY

SHAILAJA KATYAL

LLIM

SUMMER TRAINEE

CSV-CUSTODY AND CLEARING

CONTENTS

Introduction

Derivatives

History and Development of Derivatives Market

Recent Trends

Performance

Kinds of risks involved in Derivatives

Derivative Products and End Users

Pros and Cons of Derivatives

Derivative in India: A Chronology

L.C. Gupta Committee Report

J.R. Verma Committee Report

Forwards, Futures, Options & Swaps

Forward

Futures

Options

Swaps

Futures - A Procedure Note

A Futures Contract

Index Futures - Indian Scenario

SEBI guidelines for participation by FII's in trading in Futures

RBI guidelines for participation by FII's in trading in Futures

Traders in the Futures Market

Future Contract Specifications

Trading in Futures Contract

Margins

Basis

Various Entities Participating in the Derivatives Trading

How does an FII enter into a Futures Contract

Reporting to the Regulators

INTRODUCTION

Derivatives

Derivatives, the word originates in mathematics and refers to a variable, which has been derived from another variable.

For example, a measure of weight in pound could be derived from a measure of weight in kilograms by multiplying by 2.2.

In the financial sense, a derivative is a financial product, which has been derived from a market for another product. Without the underlying product and market it would have no independent existence. Some one may take an interest in the derivative products without having an interest in the underlying product market, but the two are always related and may therefore interact with each other.

Derivatives can be derived from the many widely traded markets, which are commonly known such as sugar, oil or foreign currency. Derivative markets are made by the introduction of a new security having a specific relationship to the underlying cash or spot market.

The common derivative products are Forwards, Futures, Options and Swaps. Forwards is a simply contract to take delivery...