2 Derivatives - Futures & Options Synopsis
2 Derivatives - Futures & Options Synopsis
2 Derivatives - Futures & Options Synopsis
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying asset in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. For example, Bullion traders may wish to sell their gold at a future date to eliminate the risk of a change in prices by that date. uch a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the !underlying!. The current pro"ect aims to make the investors aware of the functioning of the derivatives. Derivatives act as a risk hedging tool for the investors. The pro"ect helps the investor in selecting the appropriate derivatives instrument in order to attain maximum return and to construct the portfolio. The primary ob"ectives of the pro"ect are to study the derivatives market in #ndia$ to study the pay%off of futures and options$ to present the trading procedure of futures and options$ and to study the salient features of &ommittee reports The pro"ect finally explains the differences between the cash market and the derivatives market, the pros and cons of investing in derivatives market, and the different purposes for which investors are interested in derivative products. There are limitations as well for the pro"ect which include focus only on #ndian derivatives market$ short time period, insufficient data and the secondary data collected may not be authentic.
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INTRODUCTION
Derivatives have become very important in the field of finance. They are very important financial instruments for risk management as they allow risks to be separated and traded. Derivatives are used to shift risk and act as a form of insurance. This shift of risk means that each party involved in the contract should be able to identify all the risks involved before the contract is agreed. #t is also important to remember that derivatives are derived from an underlying asset. This means that risks in trading derivatives may change depending on what happens to the underlying asset. ( derivative is a product whose value is derived from the value of an underlying asset, index or reference rate. The underlying asset can be equity, forex, commodity or any other asset. For example, if the settlement price of a derivative is based on the stock price of a stock for e.g. #nfosys, which frequently changes on a daily basis, also have an impact on the derivative risks which also changes simultaneously on a daily basis. This means that derivative risks and positions must be monitored constantly.
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RESEARCH METHODOLOGY
(chieving accuracy in any research requires in depth study regarding the sub"ect. (s the prime ob"ective of the pro"ect is compare various #nvestment products available in the market with the existing players in the market and the impact of entry of private players in the market, the research methodology adopted was basically based on primary data via which the most recent and accurate piece of first hand information that could be collected from all possible source. econdary data was used to support primary data wherever needed. For the purpose of study, secondary data will be collected. The observational method is used to collect the primary data. The necessary data is also been collected from official records and other published sources. The collected data is classified, tabulated, analy<ed and interpreted. Finally conclusion is draw based on the study and suggestions are offered to the company for increasing its customer base. Data Collection: There are two types of data collection '. -rimary data ). econdary data
Primary Data -rimary data is personally developed data and it gives latest information and offers much greater accuracy and reliability. There are various sources for obtaining primary data i.e., ,ail survey, personal interview, Field survey, panel research and observation approach etc.
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The study is dependent on primary data to a maximum extent, which is collected by way of structures personal interview with customers.
Secondary Data econdary data is the published data. #t is already available for using and its saves time. The mail source of secondary data are published market surveys, government publications advertising research report and internal source such as sales, sales records orders, customers complaints and other business record etc. the study has also depended on secondary data to little extent, which is collected through internal source.
Sources of Secondary Data: These source were use to obtain information on, Banks and other institutions history, current issues, policies, procedures etc, wherever required. #nternet ,aga<ines .ewspapers >ournals
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LIMITATIONS
The results obtained can not be generali<ed. The study in other ma"or aspects can give more accurate results. The study is done only for a period of 5; days. econdary Data may not be authentic in all the cases.
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