Financial Derivatives 352u1g

PAPER ON THE TOPIC – FINANCIAL DERIVATIVES – AN INNOVATIVE BUSINESS PRACTICE IN DIGITAL ERA FOR SUSTAINABLE DEVELOPMENT SAI RAGINI. R PG AND RESEARCH DEPT OF COMMERCE (M.COM A/F)

Objectives of the study: 1. Analyze the current scenario of derivatives market in India. 2. To know the benefits of derivatives to businesses in India.

3. To understand the types of derivatives and players in derivatives market. Data Collection:

The study is exclusive based on secondary data. It is collected from various sources such as books, articles, reports etc.

It is a security or contract whose value depends on another contract or asset. Financial instruments - prices or values are derived from the prices of other underlying financial instruments or financial assets.

1875

1952

1995

• The Bombay Cotton Trade Association started future trading.

• Government banned cash settlement and option trading.

• Prohibition of trading options was lifted.

• Securities Contract Regulation Act 1956 of was amended and derivatives could be declared as a securities. 1999 • Derivative trading commenced in India In Jan 2000 after SEBI granted the final approval to this effect in May 2001 on the 2001 recommendation of L.C. Gupta Committee.

• Market introduced various techniques such as options and futures. 2002

India has ed an "explosive growth" and is expected to continue the same in the years to come.

Remarkable growth both in of volumes and numbers of traded contracts.

NSE alone s for 99 percent of the derivatives trading in Indian markets.

The turnover of the NSE derivatives market exceeded the turnover of the NSE cash market.

In 2008, the value of the NSE derivatives markets was Rs. 130, 90,477.75 Cr.

If we compare the trading figures of NSE and BSE, performance of BSE is not encouraging both in of volumes and numbers of contracts traded in all product categories.

Equity futures are most popular in of volumes and number of contract traded

Financial Derivatives

• Forwards • Futures • Options • Swaps

Hedgers

Speculators

Arbitrageurs

 Eliminate the risk or greatly mitigate the risks involved in business

 The prudent business operator will take the advantages of ups and downs in the derivative market. Example – ‘A’ sells the asset, if the asset is perceived to be

depreciated in the future period.

It is new to Indian Financial market. It is gaining momentum, the growth rate is rapid. The regulations & settlement procedure should be made

simpler. Profit can be increased and assets can be purchased that speculate to have higher financial value in the future. The financial derivative or money that we will earn through that increase in value is an application of financial derivative concepts.