DERIVATIVES
Introduction & Brief
History
Derivatives have come into existence around 300 years before in the
world in the commodities. It initially emerged as a hedging devises against
fluctuations in commodity prices between growers & users of commodity such
as wheat and mill owners of breads. Financial derivatives have come into
existence during 1970s and became immensely popular from 1990 onwards.
17th century Europe –
Agricultural product speculators used future/forward contracts. In India.
Badla ie carry forward transaction was in operation which was discontinued in
1993.
In the year 1969 options were discontinued but in 1995, prohibition
was withdrawn. In the year 1999, derivatives were brought under “Securities”
and in between 2000 to 2001: the trading in futures and options on indexes and
individual securities were started.
Factors driving the
growth of Derivatives
i) There is tremendous
growth in derivatives in the last 35 years for the following
reasons.
i)
increased volatility for super
profits (and off course super loss)
ii)
Interrogation at national and
international levels.
iii)
Improved communication in
lesser cost.
iv)
Sharp fall in costs of
transaction.
v)
Large varieties of derivatives
