Project Report on Derivatives Essay

5748 Words Mar 17th, 2013 23 Pages
Project Report on Derivatives | Introduction to Futures & Options

In recent times the Derivative markets have gained importance in terms of their vital role in the economy. The purpose of this report to get an orientation to the derivatives and develop a basic understanding of what it is and how does it work.

Derivatives are financial instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest, etc. Derivatives are likely to grow even at a faster rate in near future.

The emergence of the market for derivatives products, most notably futures and options, can be tracked back to the willingness of risk-averse
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There is a possibility to buy Futures in NIFTY which has a value which is directly linked with the spot value of the index based on the value of the various shares included for indexing.

The S&P CNX Nifty, also called the Nifty 50 or simply the Nifty, is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL (Credit Rating and Information Services of India Ltd). IISL is India's first specialized company focused upon the index as a core product. IISL has a marketing and licensing agreement with Standard & Poor's for co-branding equity indices. 'CNX' in its name stands for 'CRISIL NSE Index'.

Graph of S&P CNX Nifty from January 1997 to March 2011

S&P CNX Nifty has shaped up as the largest single financial product in India, with an ecosystem comprising: exchange traded funds (onshore and offshore), exchange-traded futures and options (at NSE in India and at SGX and CME abroad), other index funds and OTC derivatives (mostlyoffshore).

The S&P CNX Nifty covers 22 sectors of the Indian economy and offers investment managers exposure to the Indian market in one portfolio. The S&P CNX Nifty stocks represents about 67.27% of the free float market capitalization of the stocks listed at National Stock Exchange (NSE) as on September 30, 2012.

The prices of Nifty on 13-Dec

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