Derivatives Products

Kinds of Derivatives products

Forwards       -           Customized O.T.C. contracts

Futures           -           Standardized exchange traded 

            Options           -           Calls and puts with right out no obligations.

            Warrants        -           9 months and over maturity & O.T.C. contracts

            Leaps              -           Long term equity anticipation securities with maturity over

                                    Three years.

Baskets           -           Index options

Swaps             -           Private agreements for swapping the interest related to cash

                                    Flow called interest rate swaps or swapping the different

                                    Currencies with principal and interest.

Swaptions       -           Swaptions are options to buy or sell swaps that become

Operative at the expiry of option

              Functions of Derivative Markets

Derivative market is controlled, organized, market therefore it caters following functions:

1)         Derivative help in discovery of future as well as current price.

2)         It helps in transferring the risk.

3)         It gives higher trading volume acting as a catalyst in the capital/entrepreneurial activity.

4)         It increases savings and investment in long run.

              Participants in Derivative Markets

A)        Hedgers        : Face the risks associated with the price of assets by reducing or

                                    Eliminating it by futures or options.

B)        Speculators   : Bet or speculate on future movement in the price of assets

                                    By forming bullish or bearish opinion.

C)        Arbitrageurs: Take advantages of discrepancy between prices in two

                                      different markets