Synopsis for the project

Institute of Management & Computer Studies

Derivatives: A Hedging tool in stock market & foreign currency market

Name: Roll No:

Dinesh Behera MS1011004

Specialization: Finance
Project Guide: Prof. Saraswathy

Introduction to topic
Derivatives are instruments whose value is derived from the value of something else. They generally take the form of contracts under which the parties agree to payments between them based upon the value of an underlying asset or other data at a particular point in time. As a tool of risk management and we can define it as "A financial contract whose value is derived from the value of an underlying asset/derivative security ". All derivatives are based on some cash product.

Scope of the Study

Study covered the basic knowledge of different strategies in futures, forward & options market I.e. Hedging, Speculation an Arbitrage It also includes analysis of real market prices of for two months to make comparison between theoretical strategies and practical returns. It also covers comprehensive study of various accounting procedure of three derivatives contract: Future, Forward and Option Effects of Derivatives In Financial Statements

Objectives of the study

Whenever a study is conducted, it is done on the basis of certain objective(s) in mind. A successful completion of a project is based on the objective(s) of the study that could be stated as under: To understand the basic concept of Derivative F&O& how they work in Indian capital market. To know the nuances of derivatives. To know that how stock market and foreign currency is exposed to more risk. To know in which derivative segment investors trade more. To know the norms set by SEBI

Expected Contribution from the Study

The project aims to make a detailed study of derivatives market in India with reference to stock market and foreign currency market. The derivatives known as best hedging tool in market which aims to cut the risk created due to fluctuation in market. The benefits can be understood from investors point of view and bankers point of view. The project also aims to understand the working of hedging tools.

Research Methodology
For this project I have used only secondary data. Secondary data are those data which are collected by the other person and which are used by the researcher for study. I have used the secondary data to understand the basic concept of derivatives. The Secondary data was directly collected form the websites and Internet. The data was also in reference of available of similar studies and projects.

Limitations
The study is confined only to a small segment of the entire population due to monetary and time constraints The scope of the project is limited to conceptual and understanding the use of hedging tools only with reference to stock and foreign currency market.

Findings
As per my understanding the awareness of hedging tools is slowly gaining in mind of investors. The hedging tools i.e. forward, future, options and swap are limited to foreign currency market and stock market. The bank or intermediaries play an important role functioning this type of trade.

Conclusion
In above project we can understand the use of hedging tools to minimize the risk or cut the risk by the use of derivatives. The use of these tools is frequent among stock traders and foreign currency traders. The flexibility of price in market allows an investor to use these kinds of tool. These tools are for those who are risk takers and aware of Derivatives

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