Project Report on

STUDY ON DERIVATIVE MARKETS

INTRODUCTION
A Derivative is a contract whose value is derived from the value of another asset which could be share, stock exchange index, interest rate or currency.

Objectives:
To understand the concept of the Financial Derivatives such as Futures and Options. Functioning of Derivative markets and how they are used in reducing the risk. Research Methodology: The type of research adopted is descriptive in nature and the data collected for this study is the secondary data i.e. from Newspapers, Magazines and Internet.

INDIA INFOLINE PROFILE

VISION: Our vision is to be the most respected company in the financial services space in India. IndiaInfoline is a member of BSE, NSE and DP with NSDL and also in MCX & NCDEX. Products offered: E-Broking Distribution Insurance

Players in Derivative Market Hedgers Speculators Arbitrageurs

Members of F&O segment: There are three types of members in the futures and options segment. Trading members, trading cum clearing member and professional clearing members.

Risks involved in Derivatives

Credit risk Market risk Liquidity risk Legal risk

Types of Derivatives
Forwards: It is an agreement to buy/sell an asset at certain date in future for a certain price. They are private agreements mainly between the financial institutions or between the financial institutions and corporate clients.

FUTURES
Organized form of Forwards Clearing House Standardization Spot price, Futures price, Expiry date, Contract size. OPTIONS Call Option Put Option

SWAPS
Swaps are private agreements between two parties to exchange cash flows in the future. Broadly classified in to Interest rate swaps Currency rate swaps

DATA ANALYSIS
Average daily traded value in derivatives market is 4776.07 crores Average daily contracts traded 1,61,764

Growth comparison
Futures S&P 500 E-mini S&P 500 NASDAQ 100 Emini NASDAQ S&P CNX Nifty Options S&P 100 S&P 500 Dow Jones Industrial S&P 500 KOSPI 200 S&P CNX Nifty
8/19/2008

Exchange Jan-Mar '02 Jan-Mar '03 % change CME 5387572 5685962 5.54% CME 14878369 42035201 182.53% CME 1184132 1149677 -2.91% CME 11020125 15569208 41.28% NSE 337073 822057 143.88% CBOE CBOE Index CBOE CME Korea NSE 2320684 5905102 2384482 999386 336512365 49127 3582147 9106542 3059166 1295581 657981013 176890 54.36% 54.21% 28.29% 29.64% 95.53% 260.07%
5

v isit us at www.nseindia.com

CONCLUSION
Derivatives market in India is growing rapidly unlike equity markets. Trading in derivatives require more than average understanding of finance. Being new to markets maximum number of investors have not yet understood the full implications of the trading in derivatives. SEBI should take actions to create awareness in investors about the derivative market.

Suggestions to Investors
The investors can minimize risk by investing in derivatives Though the use of derivatives does not completely eliminate the risk, but it certainly lessens the risk. It is advisable to the investor to invest in the derivatives market because of the greater amount of liquidity offered by the financial derivatives and the lower transactions costs associated with the trading of financial derivatives. these instruments act as a powerful instrument for knowledgeable traders to expose them to the properly calculated and well understood risks in pursuit of reward i.e. profit.

THANK YOU