Study Notes

  Unit 2:  DERIVATIVE INSTRUMENTS –FORWARD AND FUTURES Syllabus- Forward Contract: Meaning & Definition, Features, Terminologies, Pricing of Forward, Contract Limitations, and Explanation of Forward Contract with a simple example Futures Contract: Meaning & Definition, Terminologies, Participants, Types of Futures Contract, Futures v/s Forwards, Pricing of Futures: Theoretical Pricing of Derivatives - Cost of Carry Model (Theory Only), Explanation of Future Contract with a simple example, Futures Market in India – Recent Developments Introduction Meaning of Forward Contract  A Forward Contract is a contract made today for delivery of an asset at a pre-specified time in the future at a price agreed upon today. In other words, a forward contract is a contract between two parties who agree to buy/sell a specified quantity of a financial instrument/commodity at a certain price at a certain date in future. A forward contract is an agreement between two parties to buy o...

  Unit 1:  RISK MANAGEMENT  I ntroduction :  Risk Risk can be defined as the chance of loss or an unfavourable outcome associated with an action. Uncertainty does not know what will happen in the future, the greater the uncertainty, the greater the risk. Definition of Risk Management :  1) Risk management is an integrated process of delineating (define) specific areas of risk, developing a comprehensive plan, integrating the plan, and conducting the ongoing evaluation’ – Dr. P.K. Gupta.  2) Risk Management is the process of measuring, or assessing risk and then developing strategies to manage the risk’ – Wikipedia.  3) Managing the risk can involve taking out insurance against a loss, hedging a loan against interest rate rises, and protecting an investment against a fall in interest rates’ – Oxford Business Dictiona ry Unit 2- Derivative instruments-Forward and Future Process of Risk Management The Five Essential Steps of a Risk Management Process are:...