Derivatives Market

Module 1: Nature of financial derivatives (Reference nos. 1 & 2)

1. What is a derivative? Explain the characteristics of a
derivative. (07)
2. Describe the features of and illustrate various types of derivative
instruments. (15)
3. Elucidate the structure or participants in the derivative
market. (08)
4. Examine the rationale for the emergence of derivatives or the
need/benefit/ (07)
significance of derivatives.
1. Write a note on derivative markets in India or Write a note on futures and
options (08)
products in India
1. Distinguish
between: (04 marks
each)
1. Forwards and Futures
2. Futures and Options
3. Forwards and Options.

Module 2: Principles of trading and hedging in index futures (Reference no. 1 & 3)
1. Give precise meaning of the following terms: (02
marks each)
1. Spot and future price
2. Contract cycle and contract specifications
3. Expiry and settlement date, settlement cycle & price
4. Types of orders
5. Trading strategies with respect to index futures including both short and long
6. position.
(08 marks)
7. Hedging and arbitrage strategies in futures. (07
marks)

Module 3: Principles of trading and hedging with options (Reference nos. 3& 4)
1. Give precise meaning of the following terms: (02 marks
each)
1. Call and Put option
2. American and European option
3. Option premium, strike price, instrinsic value
4. ATM, OTM, ITM.
2. What do the Greeks delta, gamma, theta and Vega represent? How are they
measured? (15 marks)
3. Discuss and illustrate the strategies for trading in options. (08 marks)

Module 4: Risk management systems and procedures (Reference nos. 5 & 6)
1. Discuss the various types of
risks. (08 marks)
2. Write a note on Value at Risk
(VaR). (07 marks)
3. Write a note on clearing & settlement mechanism by NSCCL or functions of
NSCCL. (07 marks)
4. Elaborate on the risk management measures taken by NSCCL (with respect to
categorization of stocks, VaR, extreme loss & mark to market margins, capping &
release of margins, margins for institutional
deals) (15
marks)
5. Briefly explain the different types of margins levied in futures and options segment: (08
marks)
1. Initial margin, b. exposure margin, c. premium margin, d. assignment margin


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Paper Pattern for derivative markets

All questions are compulsory.
Internal options may be given.
Q. 1 a & b or Q.1 a & b 08 & 07 marks for each sub-question
Q.2. a & b or Q.2. a & b 08 & 07 marks for each sub-question
Q.3. a & b or Q.3. a & b 08 & 07 marks for each sub-question
Q.4. a & b or Q.4. a & b 08 & 07 marks for each sub-question