A Study On Derivatives In Indian Capital Market

Abstract

Risk is the characteristic feature of most commodity and capital markets. Variations in the prices of agricultural and nonagricultural commodities are induced over time, by demand supply dynamics. The last two decades have witnessed many fold increase in the volume of international trade and business due to the wave of liberalization and globalization sweeping across the world. This has led to rapid unpredictable variations in the financial asset prices, interest rates, and exchange rates. The emergence of derivative market is an ingenious feat of financial engineering that provides an effective and less costly solution to the problem of risk that is embedded in the price unpredictability of the underlying asset.