Individual Project - ACF

TERMS used in Option Contracts:
1. Open Interest in Contracts: Term Open Interest refers to the total number of
outstanding derivates contract that has been unsettled like Futures and Opinions.
However, it is vital to know that the OI equals to total number of bought and sold
contracts, not the summation of both. Increase in the OI refers to the incoming of
money while decrease in OI refers to the outgoing of the money in the market.
2. Change in OI: Change in OI occurs only when the new buyer-seller enters into the
market and creates new contract. For example, if one of the traders has 100 contract
short (i.e., sale) and another trader has 100 contract long (i.e., purchase) then these
traders buy and sell the contracts and after that it is deducted from the open
interest.
3. Volume in Contracts: Volume refers to the number of the future and option
contracts that are being exchanged between buyer and seller.
4. Implied Volatility (IV): Implied volatility shows the market’s opinion of the stock’s
potential moves, but it doesn’t forecast direction. High IV results in options with
higher premiums and vice-versa. IV usually increases in bearish markets and
decreases when the market is bullish.
5. Last Traded Price (LTP): Last Traded Price is the Price at which the Trade happens
between a buyer and seller of a particular stock.
6. Bid quantity: It stipulates both the price the potential buyer is willing to pay and
the quantity to be purchased at that price.
7. Bid price: It means the price at which a market-maker or dealer is prepared to buy

securities or other assets.
For example – If there are 10 Futures contracted at Rs. 100 then “10” is Bid quantity
and “100” is Bid price.
8. Ask price: The price at which the seller is ready to sell its stocks or commodities.
9. Ask quantity: The quantity of future/option contracts that the seller is ready to sell.
10. Strike Price: Strike price is the price at which a derivative contract can be bought or
sold (exercised). The strike price is also known as exercise price.
11. Call: In options, call is defined as the right the holder has to buy the contracts.
12. Put: In options, put is defined as the right the holder has to sell the contracts.
RISK MANAGEMENT IN JSW STEEL
The company follows globally recognized COSO model (Committee of Sponsoring

Organizations). The COSO framework divides internal control objectives into three
categories: operations, reporting and compliance.
Operations objectives, such as performance goals and securing the organization’s assets
against fraud, focus on the effectiveness and efficiency of your business operations.
Reporting objectives, including both internal and external financial reporting as well as non-
financial reporting, relate to transparency, timeliness and reliability of the organization’s reporting
habits.
Compliance objectives are internal control goals based around adhering to laws and regulations
that the organization must comply with.
The risk assessment is done in order to mitigate and manage:
 Shareholders and Stakeholders interest.
 Achieve business objective.
 Enable sustainable growth.
According to the requirement of Regulation 21 of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015 and Companies Act,
2013, the company has Risk management framework in place.
The framework is in the place to reduce:
 Intended risks, say growth, are taken prudently so as to plan for the best and be
prepared for the worst
 Execution of decided strategies & plan with focus on action.
 Unintended risks like performance, incident, process and transaction risks are
avoided, mitigated, transferred (like in insurance) or shared (like through sub-
contracting).
Capital Risk Management:
The objective of this management to maintain a strong credit rating, healthy capital ratios and
establish a capital structure that would maximise the return to stakeholders through optimum
mix of debt and equity.
The Company monitors its capital using gearing ratio, which is net debt, divided to total
equity. Net debt includes, interest bearing loans and borrowings less cash and cash
equivalents, bank balances other than cash and cash equivalents and current investments.
Financial Risk Management:
The Company has a Risk Management Committee established by its Board of Directors for
overseeing the Risk Management Framework and developing and monitoring the Company’s
risk management policies. The risk management policies are established to ensure timely
identification and evaluation of risks, setting acceptable risk thresholds, identifying and
mapping controls against these risks, monitor the risks and their limits, improve risk
awareness and transparency. Risk management policies and systems are reviewed regularly to
reflect changes in the market conditions and the Company’s activities to provide reliable
information to the Management and the Board to evaluate the adequacy of the risk
management framework in relation to the risk faced by the Company. The risk management
policies aims to mitigate the following risks arising from the financial instruments:
 Market risk
 Credit risk
 Liquidity risk

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TERMS used in Option Contracts:

7. Bid price: It means the price at which a market-maker or dealer is prepared to buy

The company follows globally recognized COSO model (Committee of Sponsoring

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