Financial Derivatives

Syllabus

KMBN FM03: Financial Derivatives

UNI1                                                                                                                                        (4 Hours)

Introduction: Derivatives Market; Definition, Evolution and Features of Derivatives, Types of Derivatives, Forward , Futures and Options Market, Forward Market Transactions, Forward Contracts, Forward Market in India, Hedging with Forwards.

UNIT2                                                                                                                                       (9 Hours)

Forwards and Futures Contracts: Introduction to Forward Contracts, Features of Forward Contracts, Futures Contract-Types , Functions , Distinction between Futures and Forward Contracts, Pricing of Future Contracts, Currency Futures, Hedging in Currency-Futures, Speculation and Arbitrage in Currency Futures, Pricing of Futures, Cost of Carry Model, Application of Market Index, Index Futures in the Stock Market, Indian Derivatives Market.

UNIT3                                                                                                                                       (9 Hours)

Options: Introduction to Options, Hedging with Currency Options, Speculation and Arbitrage with Options, Pricing Options, General Principles of Pricing, Black Scholes Option Pricing Model. Index Options, Hedging with Index Options, Speculation and Arbitrage with Index Options, Index Options Market in Indian Stock Market, use of Different Option Strategies to Mitigate the Risk.

UNIT 4                                                                                                                                       (7 Hours)

Introduction to Commodity Markets- History of Commodity Trading, Major Commodities Traded in Derivatives Exchange in India, Participant in Commodity Derivative Markets, Commodity Market Indices, Commodity Futures, Commodity Options, Uses of commodity Derivatives- Hedging, Speculation

and Arbitrage.

UNIT 5                                                                                                                                       (7 Hours)

Swaps and other Derivatives: Financial Swaps, Types of Swaps, Derivatives v/s Swaps, Managing Interest Rate Exposure, Interest Rate Swaps, Currency Swaps, Forward Rate Agreement (FRA).