A SYNOPSIS ON

VOLATILITY DERIVATIVE MARKET

Supervisor Name Designation

:Prof.Falguni Pandya : : Assistance Professor

Submitted By Name of Students:-Amit Jain Shah Harshvardhan Enrollment No.- 1333 1346

Specialization: finance

Remarks of Evaluator Approved/Disapproved (I Evaluation) --------------------------------------------------------------------------------------

Session : 2011-12 Centre for Management Studies Dharmsinh Desai University, Nadiad, Gujarat

LITERATURE REVIEW

(1) INDIAN PERSPECTIVE

(A)Dayanand Arora Rathinam Francis Xavier Francis Xavier(OTC Derivatives Market in India):- In this paper ,how the Over-the-counter (OTC) derivatives is done. it is related with all future and forward contract in india and how RBI regulated the derivative market in india. Recent Regulatory Initiatives and Open Issues for Market Stability and Development. The present work is a country study of the regulatory framework of the Indian OTC derivatives markets. The research work analyses the present market structure and reflects upon the regulatory initiatives taken by the Reserve Bank of India towards better surveillance of OTC markets. In addition to that, the research work focuses on four open issues impacting the stability and development of the market. (b) Asani Sarkar ( INDIAN DERIVATIVES MARKETS1)_: In terms of the growth of derivatives markets, and the variety of derivatives users, the Indian market has equalled or exceeded many other regional markets.13 While the growth is being spearheaded mainly by retail investors, private sector institutions and large corporations, smaller companies and state-owned institutions are gradually getting into the act. As Indian derivatives markets grow more sophisticated, greater investor awareness will become essential. NSE has programmes to inform and educate brokers, dealers, traders, and market personnel. In addition, institutions will need to devote more resources to develop the business processes and technology necessary for derivatives trading.

(C ) Snehal Bandivadekar and Saurabh Ghosh(Derivatives and Volatility on Indian Stock Markets) The effect of introduction of derivatives on the volatility of the spot markets and in turn, its role in stabilising or destabilising the cash markets has remained an active topic of analytic and empirical interest. Questions pertaining to the impact of derivative trading on cash market volatility have been empirically addressed in two ways: by comparing cash market volatilities during the pre-and post-futures/ options trading eras and second, by evaluating the impact of options and futures trading (generally proxied by trading volume) on the behaviour of cash markets. The literature is, however, inconclusive on whether introduction of derivative products lead to an increase or decrease in the spot market volatility. (d) SHYAMALA GOPINATH-(Over-the-counter derivative markets in India The present article tries to put in perspective the boundary conditions, imposed by the macroeconomic constraints, which have guided the evolution of over-the-counter (OTC) markets in India and underlines the point that the process of transiting from a predominantly OTC based model to an exchange-traded model needs to follow a calibrated path. Through this transition period, the overall regulatory approach towards OTC derivative markets is as important as addressing the transactional aspects. In India, unlike the developed financial markets where OTC derivative markets epitomised complex, unregulated financial innovations that grew exponentially over the last two decades, the OTC derivative markets have evolved within a regulated space. The major elements of this regulatory framework include abroad specification of products to be permitted, nature of participants in the markets, distinct responsibilities for market makers and users for all OTC derivatives, effective reporting systems for capturing systemic information and focus on developing market infrastructure for post-trade clearing and settlement.

GLOBAL PERSPECTIVE EACH

(1) MICHAEL

R. DARBY :_( OVER-THE-COUNTER DERIVATIVESAND SYSTEMIC RISK TO THE GLOBAL FINANCIAL SYSTEM):-

OTC derivatives are an important innovation which have contributed substantially to risk management wherever they have been available and used. As a result at the same time that the market has grown rapidly, risks faced by end users have declined. These risks have not simply been shifted to the dealers, however, as many of the risks can be cancelled in the market. Furthermore, the growing size of the market has led to the development of new risk management techniques and skills in dealer financial institutions which have had the effect of reducing their overall riskiness by managing risks which were previously not actively faced and managed. This general reduction of risk in the system has on balance contributed to the overall reduction of systemic risk. There are several areas where further improvements are underway to ensure that balance is maintained and enhanced:

OBJECTIVES OF THE STUDY

To understand the concept of the Derivatives and Derivative Trading. To know different types of Financial Derivatives To know the role of derivatives trading in India. To analyses the performance of Derivatives Trading since 2005 with special reference to Futures & Options To know volatility in Derivatives trading

RESARCH METHODOLOGY
Method of data collection:Secondary sources:It is the data which has already been collected by some one or an organization for some other purpose or research study .The data for study has been collected from various sources: Books Journals Magazines Internet sources

Statistical Tools Used: Simple tools like bar graphs, tabulation, line diagrams may be used.

SCOPE OF THE PROJECT

The project covers the derivatives market and its instruments. For better understanding various strategies with different situations and actions have been given. It includes the data collected in the recent years and also the market in the derivatives in the recent years. This study extends to the trading of derivatives done in the National Stock Markets.

REFERENCE OF LITERATURE

(1)MICHAEL R. DARBY :_( OVER-THE-COUNTER DERIVATIVESAND SYSTEMIC RISK TO THE GLOBAL FINANCIAL SYSTEM):http://www.nber.org/papers/w4801.pdf?new_window=1 (2) Dayanand Arora /Rathinam Francis Xavier Francis Xavier(OTC Derivatives Market in India):- http://scholar.google.co.in/schhp? hl=en&tab=ws (3)SHYAMALAGOPINATH(Over-the-counter derivative markets in India) http://scholar.google.co.in/schhp?hl=en&tab=ws (4) Snehal Bandivadekar and Saurabh Ghosh(Derivatives and Volatility on Indian Stock Markets) http://scholar.google.co.in/schhp?hl=en&tab=ws (5) Asani Sarkar( INDIAN DERIVATIVES MARKETS1 http://scholar.google.co.in/schhp?hl=en&tab=ws