Derivative s of Indian Stock Mky Ppt Presentation

8/3/2019 Derivative s of Indian Stock Mky Ppt Presentation

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A security whose price is dependent upon or derived from one ormore underlying assets. The derivative itself is merely a contractbetween two or more parties. Its value is determined byfluctuations in the underlying asset. The most commonunderlying assets include stocks,bonds, commodities, currencies, interest rates and marketindexes. Most derivatives are characterized by high leverage


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Futures contracts, forward contracts,options and swaps are the mostcommon types of derivatives.

Derivatives are contracts and can beused as an underlying asset. Thereare even derivatives based on

weather data, such as the amount ofrain or the number of sunny days in aparticular region


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What are Derivatives?A. The term"Derivative" indicates that it has no

independent value, i.e. its value isentirely "derived" from the valueof the underlying asset. The

underlying asset can be securities,commodities, bullion, currency, livestock or anything else. In otherwords, Derivative means a forward,future, option or any other hybrid


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Forwards: A forward contract is acustomized contract between twoentities, where settlement takes

place on a specific date in the futureat today's pre-agreed price.

Futures: A futures contract is anagreement between two parties tobuy or sell an asset at a certain timein the future at a certain price.Futures contracts are special types of


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Options: Options are of two types -calls and puts. Calls give the buyerthe right but not the obligation to

buy a given quantity of theunderlying asset, at a given price onor before a given future date. Puts

give the buyer the right, but not theobligation to sell a given quantity ofthe underlying asset at a given priceon or before a given date.


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Interest rate swaps: These entailswapping only the interest relatedcash flows between the parties in the

same currency.

Currency swaps: These entailswapping both principal and interest

between the parties, with the cashflows in one direction being in adifferent currency than those in the

opposite direction.


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LEAPS: The acronym LEAPS meansLong-Term Equity AnticipationSecurities. These are options having

a maturity of upto three years.

Baskets: Basket options are options

on portfolios of underlying assets.The underlying asset is usually a

moving average or a basket ofassets. Equity index options are aform of basket options.


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Swaptions: Swaptions are optionsto buy or sell a swap that willbecome operative at the expiry of

the options. Thus a swaption is anoption on a forward swap. Ratherthan have calls and puts, the

swaptions market has receiverswaptions and payer swaptions. Areceiver swaption is an option toreceive fixed and pay floating. Apayer swaption is an option to pay

Derivative s of Indian Stock Mky Ppt Presentation

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