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Title : “A STUDY ON

“By far the most significant event in finance during the past decade has been the
extraordinary development and expansion of

financial derivatives…These instruments

enhances the ability to differentiate risk and allocate it to those investors most able and
willing to take it- a process that has undoubtedly improved national productivity growth and
standards of livings.”
 A word formed by derivation. It means, this word has been arisen by derivation.
 Something derived; it means that some things have to be derived or arisen out of the
underlying variables. A financial derivative is an indeed derived from the financial
 Derivatives are financial contracts whose value/price is independent on the behavior
of the price of one or more basic underlying assets. These contracts are legally
binding agreements, made on the trading screen of stock exchanges, to buy or sell an
asset in future. These assets can be a share, index, interest rate, bond, rupee dollar
exchange rate, sugar, crude oil, soybeans, cotton, coffee and what you have.
 A very simple example of derivatives is curd, which is derivative of milk. The price
of curd depends upon the price of milk which in turn depends upon the demand and
supply of milk.
The first step towards introduction of derivatives trading in India was the promulgation of the
Securities Laws (Amendment) Ordinance, 1995, which withdrew the prohibition on options
in securities. SEBI set up a 24 – member committee under the chairmanship of Dr. L.C.
Gupta on November 18, 1996 to develop appropriate regulatory framework for derivatives
trading in India, submitted its report on March 17, 1998. The committee recommended that
the derivatives should be declared as ‘securities’ so that regulatory framework applicable to
trading of ‘securities’ could also govern trading of derivatives.

The abandonment of the Bretton Woods agreement resulted in currency values being allowed to float. Futures contracts on individual stocks were launched in November 2001.S. The FX contract capitalized on the U. SEBI approved trading in index futures contracts based on S&P CNX Nifty and BSE-30 (Sensex) index. Investors in foreign currency denominated securities would like to secure strong foreign earnings by obtaining the right to sell foreign currency at a high conversion rate.To begin with. HISTORY OF CURRENCY DERIVATIVES Currency futures were first created at the Chicago Mercantile Exchange (CME) in 1972. increasing the risk of doing business. willing to protect their earnings from the foreign currency depreciation by locking the currency conversion rate at a high level. . The trading in index options commenced in June 2001 and the trading in options on individual securities commenced in July 2001. thus defending their revenue from the foreign currency depreciation. which had fixed world exchange rates to a gold standard after World War II.The contracts were created under the guidance and leadership of Leo Melamed. The concept of currency futures at CME was revolutionary. Multinational companies use currency derivatives being engaged in direct investment overseas. UTILITY OF CURRENCY DERIVATIVES Currency-based derivatives are used by exporters invoicing receivables in foreign currency. and gained credibility through endorsement of Nobel-prize-winning economist Milton Friedman. By creating another type of market in which futures could be traded. They want to guarantee the rate of purchasing foreign currency for various payments related to the installation of a foreign branch or subsidiary. abandonment of the Bretton Woods agreement. CME Chairman Emeritus. CME currency futures extended the reach of risk management beyond commodities. Their use by importers hedging foreign currency payables is effective when the payment currency is expected to appreciate and the importers would like to guarantee a lower conversion rate. which were the main derivative contracts traded at CME until then. or to a joint venture with a foreign partner.

INTRODUCTION TO CURRENCY DERIVATIVES Each country has its own currency through which both national and international transactions are performed. . The foreign exchange markets of a country provide the mechanism of exchanging different currencies with one and another. NEED OF THE STUDY: The introduction of currency derivatives in India is a landmark decision which is likely to be a boon for importers. the currency units of a country involve an exchange of one currency for another. All the international business transactions involve an exchange of one currency for another. Thus. Thus the very subject raises a kind of aversion for the common people. and when borrowed fund are paid to the lender then the home currency will be converted into foreign lender’s currency. These derivative products have a wide range with their special features suiting to the needs and requirements of the individuals. The price of one currency in terms of other currency is known as exchange rate. If any Indian firm borrows funds from international financial market in US dollars for short or long term then at maturity the same would be refunded in particular agreed currency along with accrued interest on borrowed money. exporters and companies with foreign exchange exposure. It means that the borrowed foreign currency brought in the country will be converted into Indian currency. it is time to have a broad understanding of them which are mostly couched in jargons and technical terms. facilitating transfer of purchasing power from one country to another. As currency derivative is new to India. and thus. For example.

The study is limited to the analysis made for types of instruments of derivates each strategy is analyzed according to its risk and return characteristics and derivatives performance against the profit and policies of the company. The value of the currencies determines the values of the currency derivatives.The currency derivatives are contracts just like any other derivatives viz. The research methodology adopted for carrying out the study was at the first stage theoretical study is attempted and at the second stage observed online trading on NSE/BSE. To analyze different currency derivatives products. Stock. the study is not based on the international perspective of derivative markets. the underlying in this case is currencies. Index etc. To study the basic concept of Currency future To study the exchange traded currency future To understand the ways of considering currency future price. ..  SOURCE OF DATA COLLECTION Secondary data were used such as various books. SCOPE OF THE STUDY: The study is limited to “Derivatives” with special reference to futures and options in the Indian context. Unlike the stock. report submitted by RBI/SEBI committee and NCFM/BCFM modules. RESEARCH METHODOLOGY  TYPE OF RESEARCH In this project Descriptive research methodologies were used. OBJECTIVES OF THE STUDY The basic idea behind undertaking Currency Derivatives project is to gain knowledge about currency future market.

founded in 1994 by Mr. AR provides a breadth of financial and advisory services including wealth management. with a clear focus on providing long term value addition to clients. Private Clients. brokerage & distribution of equities. commodities.COMPANY PROFILE AnandRathi Securities Limited AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. The firm's philosophy is entirely client centric. The offices of AnandRathi are located in 197 cities across 28 cities and it also has branches in Dubai and Bangkok with more than 44000 employees. structured products . AnandRathi.000+ clients nationwide. Corporate and Institutions and was recently ranked by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-rich. 4billion. It has 1. corporate advisory. The entire firm activities are divided across distinct client groups: Individuals. investment banking. ethics and professionalism. mutual funds and insurance.00. It has a daily turnover in excess of Rs. while maintaining the highest standards of excellence.all of which are supported by powerful research teams. The firm. It is also a leading Distributor of IPO's .

Tamil Nadu. Madhya Pradesh. Uttar Pradesh. Gujarat. Insurance broking launched Launch of Wealth Management services in Dubai. Goa. Bihar . Mission To be India's first multinational providing complete financial services solution across the globe. Uttaranchal. Vision "To be a shining example as leader in innovation and the first choice for clients & employees" Milestones  1994: Started activities in consulting and Institutional equity sales with staff of 15  1995: Set up a research desk and empanelled with major institutional investors  1997: Introduced investment banking businesses. Haryana Jammu & Kashmir. Jharkhand. Punjab. Delhi . Rajasthan. Orissa. Assam. Kerala. West Bengal. Chhattisgarh. Retail Branch network exceeds 50 . In India AnandRathi is present in 21 States: Andhra Pradesh .In the year 2007 Citigroup Venture Capital International joined the group as a financial partner. Retail brokerage services launched  1999: Lead managed first IPO and executed first M & A deal  2001: Initiated Wealth Management Services  2002: Retail business expansion recommences with ownership model  2003: Wealth Management assets cross Rs1500 crores. Maharashtra. Karnataka.

Why choose AR?  Superior understanding of the Indian economy & markets  Ability to structure and manage your tax and regulatory compliances  Dedicated relationship team  Unparalleled product range .Indian and Global .Domestic in India by Asiamoney Polls 2009 and Ranked as the #2 Private Bank . 2009:Anand Rathi has been Ranked as the #1 Private Bank .Overall in India by Asiamoney Polls 2009  2010:Anand Rathi Private Wealth adjudged Best Domestic Private Bank (India) by Asia Money Polls 2010 for the second consecutive year.