A Study On Derivatives At ICICI

BY
TITIKSHA
Abstract

 The changes in interest rates, exchange rates and stock prices of different financial
markets has increased the financial risk to the corporate world. Difficult changes in the
macroeconomic factors have even threatened the very survival of business world. It is
therefore essential to develop a set of financial instruments known as derivatives in the
Indian financial markets to manage risk. The basic purpose of these instruments is to
provide commitments to prices for future dates for giving protection against adverse
movements in future prices, in order to decrease financial risk. Today financial derivatives
have become increasingly popular and most commonly used in the world of finance. In
India, the emergence and growth of derivatives market is relatively a recent phenomenon.
Since its inception in June 2000, derivatives market has exhibited exponential growth both
in terms of volume and number of contract traded. Derivatives trading in India has
surpassed cash segment in terms of turnover and number of traded contracts.
Introduction

 The emergence of market for derivatives products, most notably forwards futures and
options can be tracked back to the willingness of risk-averse economic agents to guard
themselves against uncertainties arising out of fluctuations in asset prices. By their very
nature financial markets are marked by a very high degree of volatility. Through the use of
derivatives products it is possible to partially or fully transfer price risk by locking-in asset
prices.
 Derivatives are risk management instruments which derive their value from underlying asset.
The underlying asset can be bullion, index, share, bonds, currency etc. Banks, securities firms,
companies and investors to hedge risks, to gain access to cheaper money and to make profit
use derivatives. They are likely to grow even at a faster rate in future.
Need For Study

 In recent times the Derivative markets have gained importance in terms of their vital role
in the economy. The increasing investments in derivatives have attracted my interests in
this area. Through the use of derivative products it is possible to partially or fully transfer
price risks by locking-in asset prices. As the volume of trading is tremendously increasing
in derivates market, this analysis will be of immense help to the investors.
Significance Of Derivatives

 Risk management
 Price discovery
 Market Efficiency
 Objectives Of The study

 To study about risk management with the help of derivatives.

 To find the profit/loss position of futures buyer and seller and also the option writer and
option holder.
 To analyse the operations of futures and options.
 Scope Of The Study

 The study is limited to” Derivatives” with special reference to futures and option in the
Indian context and the Inter-connected Stock Exchange has been taken as a representative
sample for the study. The study has only made a humble attempt at evaluation derivatives
market only in Indian context. The study is not based on the international perspective of
derivatives markets, which exists in NASDAQ, CBOT etc.