Financial Derivatives

Module No.

Detailed Course Objectives

Module 1

Introduction to Derivatives Trading and Settlement: Introduction to Risk Management, Managing Risk, Types of Business Risks, Derivatives and Derivative Products, Classification of Derivatives, Participants in Derivative Market, Functions of Derivatives Trading of Derivatives Contracts Futures and Options Trading System, The Trader Workstation, Futures and Options Market Instruments, Criteria for Stocks and Index Eligibility for Trading, Charges; Clearing and Settlement - Clearing Entities, Clearing Mechanism, Settlement Procedure, Risk Management, Margining System.

Module 2

Equity Futures Derivatives and Trading Strategies: Types of Futures – On the Basis of Maturity, On the Basis of the Underlying Asset; Margining in the Futures Market; Terminologies Used in the Futures Market; Futures Pricing – Cost of Carry Model; Trading Strategies Using Futures.

Module 3

Option Derivatives and Trading Strategies using Options: Types of Options - Call Options, Put Options; Option Pay-Offs; Terminologies Used in the Options Market; Option Pricing – Binomial Model and Black & Scholes Model; Trading Strategies Using Options- Caps, Collars, Butterfly, Straddle, Strangle etc. Option Greeks.

Module 4

Swaps - Concept and Characteristics; Types of Swaps: Interest Rate Swaps and Currency Swaps; Structure of Interest Rate Swaps and Intermediated Interest Rate Swaps; Relation between Interest Rate Swaps and Forward Rate Agreements; Calculations on Swaps.

Module 5

Foreign Exchange Risk & Corporate Exposure Management: Types of Exposure – Transaction, Economic and Translation; Foreign Exchange Risk – Types, Risk Management Techniques – External and Internal. International Portfolio Diversification and Transfer Pricing, Currency Derivatives and its Application, Risk Management Practices in India.