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Course M G T 6 2 5 Course DERIVATIVES & RISK MANAGEMENT

Code: Title:

L T P Credit
Weightages
(or Max. Marks)
CA MTE ETE
3 1 0 4
40 20 40
Pre-requisites:
Sr. Topic Approximate No.
No. of Lectures
(Schedule
keeping total as
12*L)
1. Introduction to derivatives: Definition, Products, Participants and functions, types of 4
members to be included, types of derivatives and Exchange-traded vs. OTC derivatives
markets.
2. Introduction to futures: Forward contracts, Limitations of forward markets, Introduction 5
to futures, Stock Index futures, Commodity Futures and Currency Futures, Distinction
between futures and forwards contracts, pay-off and profit/loss diagrams.
3 Introduction to options: Option terminology, Distinction between Futures and options, 5
Index derivatives. Valuation of options; European and American calls and puts, Pay-off
and Profit/loss diagrams, Black-Scholes option pricing model(including currency and
commodity options)
4 Risk Management and Futures & Options: Use of Futures (Strategies of hedging, 5
speculation and arbitrage): Index futures, Stock futures; Use of Options (Strategies of
hedging, speculation and arbitrage): Index options, Stock options, currency and
commodity options; Risk management structure and policies.
5 Management of Derivatives Exposure: Introduction, nature of derivatives trading, 5
setting of Risk-vision, reasons for managing derivatives risk and types of risk in derivative
trading.
6 Trading: Futures and options trading system, Entities in the trading system, Basis of 5
trading, Corporate hierarchy, Order types and conditions, The trader workstation, The
market watch window, Inquiry window, Placing orders on the trading system.
7 Clearing and settlement Marks: Clearing entities, Clearing members, Clearing banks, 4
Clearing mechanism, Settlement mechanism, Settlement of futures contracts,
Settlement of options contracts, Special facility for settlement of institutional deals.
8 Regulatory framework : Regulation for derivatives trading and SEBI guidelines related 3
to derivatives trade: L.C Gupta committee Report &J.R Varma committee report.
Total 36

Textbook:
Varma, Jayanth, Derivatives and Risk Management, Tata Mc Graw Hill Publications: New Delhi:2008

Additional Readings:
Gupta, S.L. Financial Derivatives, Prentice Hall Publications, New Delhi:2008

Kolb, Robert W: Understanding Futures Markets, Prentice Hall Inc., New Delhi.

Component of Continuous Assessment: (To be reported out of 100)

Sr. No Component Frequency in term Marks

1 Attendance 10
2. Assignments 04 40
3 Case Studies 02 20
4 Quiz 02 20
3. Term Paper(minor Project) 01 10
Total 100

Additional Passing Requirements (if any):

Salient Pedagogical Strategies

• Slide Show
• Presentation By Students
• Dummy Trading.
• News Analysis(L & T)
• Case based teaching
• Group Discussions(T)