ABSTRACT
The objective of this chapter is to introduce the derivatives segment of the financial market worldwide and in India; basic concepts of financial derivative contracts; major product structures under various asset classes, with special reference to Fixed Income products or Interest Rates; necessary pay-offs to concerned counterparties; users and usefulness of various derivative products. At the end of this chapter, readers are expected to be familiar with:
Various Concepts of Derivatives Market and Products: Exchange Traded vs. OTC Market; Forwards, Futures, Swaps and Options (Call & Put).
Present status of Financial Derivatives Market worldwide and in India.
Role of Derivatives as a “Useful Financial Innovation” and as a “Weapon of Mass Destruction”.
Estimation of Payoffs to Buyer and Seller.
Advantages/Uses of Derivatives contracts.
Risks in and Risk Management of Different Types of Derivative Instruments.
