A derivative is a contract between two

parties which derives its value/price

from an underlying asset. The most
common types of derivatives are futures,
options, forwards and swaps. Generally
stocks, bonds, currency, commodities
and interest rates form the underlying
asset.
Learning Objectives
Futures
A Futures Contract can be defined as an
agreement to buy / sell a standard quantity of a
specific instrument at a predetermined future
date and at a price agreed between the parties
through open outcry on the floor of an organised
futures exchange.
Currency Interest Rate Index Commodity
Individual
Stock
An Option is a contract in which the seller of the
contract grants the Buyer the right to purchase
from the Seller (Writer) a designated instrument
or an asset at a specific price which is agreed upon
at the time of entering into the contract.
Buyer has a right but not an obligation to buy or
sell.
Call Option
Put Option
American Option
European Option
FORWARDS
A Forward Contract is a simple
derivative. It is an agreement to buy or
sell an asset at a certain future time for a
certain price. It is transacted in OTC.
FORWARDS LONG POSITION
One of the parties to a Forward Contract
assumed a long-position and agrees to buy
the underlying asset on a certain specified
future date for a certain specified price.
FORWARDS SHORT POSITION
The Other Party assumes short-position
and agrees to sell the underlying asset on
the same date for the same price.
The Specified Price in the Forward Contract
will be referred to as the Delivery Price.
FORWARDS NUTSHELL
The Forward Contract has to be executed by
both the parties on the Due Date (or Specified
Maturity Date) by delivery of the asset by the
Seller and by payment of money (the Delivery
Price) by the Buyer, to each other.
SWAPS
It refers to simultaneous purchase &
sale of currency for different maturities
or vice versa.

It is the agreed exchange of future cash
flows with or without exchange of cash
flows at present
Interest Rate SWAPS
Commodity SWAPS
Equity SWAPS
Currency SWAPS
Placement Counselling
How Important is your job to
your overall happiness?
A) Very important, my work is my happiness 65
B) Work is a priority but not equal to happiness 17
C) I try not to let work define my happiness 4
D) I work to live not live to work 14

Why do you want an MBA?
A) To be a successful entrepreneur 75
B) To get into the Corporate 25
C) For employability65
D) No aspirations 35

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