Financial Derivatives

Paper Code: 
FMG 616
Credits: 
3
Contact Hours: 
45.00
Max. Marks: 
100.00
Objective: 

The objective of this course is to acquire understanding about quantitative techniques and strategies used for pricing the main financial derivatives available for trading in financial markets.

9.00
Unit I: 
Basics of Derivatives

• Evolution of derivatives market,
• Indian derivatives Market,
• Types of derivatives markets,
• Significance of derivatives,
• Market participants and their roles in the derivatives markets,
• OTC and Exchange Traded Market.

9.00
Unit II: 
Introduction to Forwards and Future Contract

• Meaning of Forwards contract,
• Features of Forward contract
• Advantages disadvantages of forward contract,
• Difference between forward and spot contract,
• Working of Forward contract, and classification of forward.
Introduction to Future Contract:
• Meaning,
• features of Future contract,
• Advantages and disadvantages,
• Comparison between forward and future contract.
• Strategies for hedging, speculation and arbitrage in futures market.
• Future market operational guidelines.

9.00
Unit III: 
Introduction to Options

• Concept, features,
• Types of options,
• Distinction between options and futures
• Option Trading Strategies- Option spreads ,
• Straddle,
• Strangle,
• Covered Call,
• Protective Put, Butterfly spread.

9.00
Unit IV: 
Swaps:

• Meaning, features,
• Advantages and disadvantages of swaps,
• Types of swaps.
• Currency Swaps- definition, features, and uses.
• Interest rate swaps- definition, features and Types.
• Economic motive for Swaps.

9.00
Unit V: 
Trading , clearing and settlement System of derivative market Legal and Regulatory Environment-

• Securities Contract (Regulation) Act, 1956,
• Securities and Exchange Board of India Act, 1992,
• Important rules and regulations in derivatives trading,
• Regulation in clearing & settlement and risk management

Essential Readings: 

• Williams, Michacls, Fundamentals of Option Markets, Mc Graw Hill, New Delhi
• Hull, John, Introduction to Futures, Option market, Prentice Hall of India, New Delhi
• Redhead, Keith, Financial Derivatives- An Introduction to futures, forwards,option and swaps, Prentice Hall of India, New Delhi
• Bhole L.M., Financial Institutions and Markets, Tata Mc Graw Hill, New Delhi
• Pathak, Bharati V., Indian Financial System, Pearson Education, New Delhi.
• NCFM and NISM Modules.
• Prafulla Kumar Swain, Financial Derivatives, Himalaya Publishing House.

Academic Year: 
2021-2022
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