- Published: November 2011
- Region: India
Financial Derivatives in India
- Published: January 2011
- Region: Global, India
- 198 Pages
- New Century Publications
Derivatives are financial instruments/contracts whose value depends upon the value of an underlying. Since their value is essentially derived out of an underlying, they are financial abstractions whose value is derived mathematically from the changes in the value of the underlying.
In recent years, complex financial products?such as asset-backed securities, derivatives, credit-default swaps (CDSs) and collateralised debt obligations (CDOs)?have proliferated in developed countries. These products have become highly popular with banks and financial institutions as they allow them to hedge their risks and manage their financial resources more efficiently.
Although various structured products have enabled the transfer of risks and enhanced the liquidity of instruments, the recent turmoil in the US sub-prime mortgage market and related developments connected with complex derivatives have also brought to the fore the risks posed by these instruments.
In India, financial products such as mortgage-backed securities (MBS) and asset-backed securities (ABS) are in existence. Besides the securitised products, the Indian forex and rupee derivative markets have also developed significantly over the years. In its Annual Policy Statement for the year 2008-09, the Reserve Bank of India (RBI) announced the introduction of currency futures in the eligible exchanges for which the broad framework was announced in August 2008.
This book explains, in simple and lucid language, the basics of financial derivatives and their growth and role in the Indian financial system. SHOW LESS READ MORE >
1. Capital Market in India: An Overview - Introduction; Significance of Capital Market; Capital Market in the Pre-reforms Period; Securities and Exchange Board of India (SEBI); Capital Market Reforms since 1991; Upgradation of Stock Exchanges; Corporatisation and Demutualisation of Stock Exchanges; Trading Infrastructure in Stock Exchanges; Free Pricing of Capital Issues; Depository System, Dematerialisation; Improvements in Disclosure Norms; Transparency and Efficiency; Shortening of Settlement Cycle; Redressal of Investors? Grievances; Concluding Remarks.
2. Basics of Derivatives Market - Emergence of Complex Financial Products; Meaning of Derivatives; Reasons for the Popularity of Derivatives; Variants (or Types) of Derivative Contracts; Participants in the Derivatives Market; Economic Role of Derivatives; History of Derivatives; International Experience of Derivatives.
3. Forwards, Futures and Options - Forwards/Forward Contracts; Futures/Future Contracts; Options; Pricing of Derivatives; Types of Orders.
4. Evolution of Derivatives Market in India - Main Recommendations of L.C. Gupta Committee; Amendment of Securities Contract Regulation Act (SCRA); Membership of NSE for Derivative Segment; Requirements for Trading in Derivatives; SEBI Measures to Protect the Rights of Investors in the Derivatives Market; Recent Developments in the Derivatives Market; Portfolio Investment Flows: Global and Indian Experiences; Concluding Observations.
5. Credit Derivatives in India - Forms of Credit Derivatives; Significance of Credit Derivatives; Benefits of Credit Derivatives; Risks Involved in Credit Derivatives; Credit Derivatives and Sub-prime Crisis of 2007; Credit Derivatives in India; Asset Securitisation.
6. Traders and Trading System of Derivatives - Traders in Derivatives Market; Trading System; Order Types and Conditions; Market Watch; Placing Orders on the Trading System; Eligibility Criteria for Securities/Indices Traded in F&O.
7. Payment, Clearing and Settlement Systems in Indian Financial Markets - Need for a Sound Payment and Settlement System; Segments of Payment System; Large Value Payment Systems; Retail Payment Systems; Reforms Pertaining to Clearing and Settlement; Central Counterparties; Government Securities Settlement System; Role of RBI in Payment and Settlement System.
8. Clearing and Settlement System for Financial Derivatives - National Securities Clearing Corporation Limited (NSCCL); Settlement of Institutional Deals; Risk Management
Appendix: Financial Sector Reforms in India since 1991
Glossary of Derivatives-related Terms
Jagadish R. Raiyani is presently Assistant Professor of Commerce, Geetanjali College, Saurashtra University, Rajkot, Gujarat. He has published research papers in reputed journals including Professional Banker (ICFAI), Yojna (Planning Commission) and Arthsankalan (Kurukshetra). He has participated in many National and International level conferences. His research interests include accounting and finance, auditing and taxation.