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Table Of Contents

Q1.1: What is a “spot” transaction?
Q1.2: That’s okay for shirts - but does it ever happen in fi- nance?
Q1.3: What is a “forward” transaction?
Q1.4: What are “derivatives”?
Q1.5: What are “exchange–traded derivatives”?
Q1.6: What are “OTC derivatives”?
Q1.7: Is “badla” trading like derivatives trading?
Q1.9: Why is hedging using derivatives termed “risk transfer”?
Q2.1: Why is forward contracting useful?
Q2.2: What is “leverage”?
Q2.3: What are the problems of forward markets?
Q2.4: Why do forward markets have poor liquidity?
Q2.5: Why are forward markets afflicted by counterparty risk?
Q2.6: How does counterparty risk affect liquidity?
Q3.1: What is “price–time priority”?
Q3.2: What is a futures contract?
Q3.4: What is cash settlement?
Q3.5: What determines the price of a futures product?
Q3.8: Can we concretely sketch the operations of one futures market?
Q4.1: What is an “option”?
Q4.2: How would index options work?
Q4.3: What kinds of Nifty options would trade?
Q4.4: When would one use options instead of futures?
Q4.6: What determines the price of an option?
Q5.1: What is the status of derivatives in the equity market in India?
Q5.3: What derivatives exist in India in the foreign exchange area?
Q5.4: What is the status in India in the area of commodity derivatives?
Q5.7: How did we get to where we are in derivatives in India?
Q6.2: At the individual stock level, are futures or options bet- ter?
Q7.1: How do futures trade?
Q7.2: How would a seller “deliver” a market index?
Q7.3: What products will be traded on NSE’s market?
Q7.4: What is the market lot?
Q7.5: What kind of margins do we expect to see?
Q7.7: Who are the users of index futures?
Futures pricing
Q8.1: What determines the fair price of a derivative?
Q8.2: What determines the fair price of an index futures prod- uct?
Q8.3: What is ‘basis’?
Q8.4: What is “basis risk”?
Choice of index
Q10.3: Why does liquidity matter for a market index?
Q10.4: What transactions costs do we see in trading Nifty?
Q11.1: Who needs hedging using index futures?
Q11.4: What does a speculator on an individual stock do?
Q11.12: What influences basis risk?
Q12.2: When is this attractive?
Q12.4: When is this attractive?
Q13.3: I have a forecast about Nifty. What can I do?
Q13.6: How can these risks be minimised?
Intermediation
Q15.3: What about market manipulation on derivatives mar- kets?
Q15.6: Are derivatives on Indian assets traded outside India?
Q15.8: How will the two markets interact?
Q15.9: Is SIMEX a serious threat to NSE?
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Derivatives Faqs

Derivatives Faqs

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Published by Amol Mahajan
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Published by: Amol Mahajan on Apr 28, 2013
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