LOVELY PROFESSIONAL UNIVERSITY

INSTRUCTION PLAN (for Lectures)

Term: IV
Course No. MGT625 Course Title: Derivatives and Risk Management L: 3 T: 1 P: 0

Textbook: 1. Varma, Jayanth, Derivatives and Risk Management,

Tata Mc Graw Hill Publications: New Delhi: 2008

Other Specific Books: 2. Gupta, S. L. Financial Derivatives, Prentice Hall Publications, New Delhi: 2008
3. Kolb, Robert W: Understanding Future Markets, Prentice Hall Inc., New Delhi
4. “Indian Stock Market Review,” National Stock Exchange Publications: 2008
5. Apte, P. G. International Financial Management, Prentice Hall Inc., New
Delhi
6. Bhalla, V. K., Financial Derivatives, Risk Management, S. Chand and Company
Ltd.

Other readings:
S. No Journal articles as compulsory reading
7 Siems, Thomas, “10 Myths About Financial Derivatives,”
http://www.cato.org/pubs/pas/pa-283.html
8 Bose, Suchismita and Bhaumik, Sumon Kumar, “Impact of Derivatives Trading on
Emerging Capital Markets: A Note on Expiration Day Effects in India,”
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp863.pdf
9 Srivatava, Pulkit, “Financial and Legal Aspects of Derivatives Trading in India,”
http://students.indlaw.com/display.aspx?4269
10 Premya, Samantha and Pradeepta, “Impact of Future Trading,” Journal of Applied
Finance, Vol. 13, October 2007
11 Varma, J. L., “Regulatory Framework for Financial Derivatives”, Committee Report;
SEBI Publications: 2008
12 Shirur, Shrinivas, “Dilemma of Corporate Action-Bonus Issue v/s Stock Split,”
Vikalpa, IIMB, Vol- 33 July-Sept 2008
13 Sarkar, Asani, “Indian Derivative Market,” The Oxford Companion to Economies in
India, Oxford University Press, New Delhi: 2006
14 Bagri and Vohra, “Futures and Options: The Indian Scenario,” National Seminar on
Derivatives
15 Bansal, S. C., “Financial Derivatives,” National Seminar on Derivatives
16 Jayanth, Rama, “Derivatives in Bull and Bear Markets,” National Seminar on
Derivatives

Relevant websites:
S. No Web address Salient Features
17 http://www.nseindia.com This site gives information on
market trends, level of trade,
prices etc of derivatives.
Apart from this on this
website certified modules are
also available.
18 http://www.sebi.gov.in FAQs on this site make a
very good reading. The site
has details of all rules and
regulations as applicable to
derivatives trading.
19 http://www.moneycontrol.com This site if subscribed to
sends alerts on the latest
developments in the field of
derivatives trading. This site
also gives the facility of
creating an artificial portfolio
online.
20 http://derivativesindia.com This site has all the updated
existing information about
derivatives products, their
types, trading mechanism etc.
21 http://bseindia.com This site has details of prices
of various stocks and
derivatives products.
22 http://www.cato.org/pubs/pas/pa-283.html Explains the mechanism of
trading in derivatives for
better understanding of the
subject.
23 http://www.margrabe.com/dictionary/derivatives/html An international online
dictionary of derivatives
24 http://derivativesindia.com/scripts/glossary/index.articlese- Provides details of contact
aeticles specifications

Detailed Plan for Lectures

Lecture Topic Chapters / Assignment / Pedagogical aid Date
No. Sections Task to be Demonstration/ Delivered2
of assigned to case study /
Textbook students images/
/ Other 3 DoS4 animations etc5.
reference1

1 Introduction to Derivatives Ch-1/Ref-

6, Ch-
1/Ref-2,
Ref 20,
Ref 13
2 Applications and Benefits of Ref 20,
Derivatives Ref 15,
Ch-1/Ref-
6, Ch
1/Ref 2
3 Types of Derivatives Ref 20,
Ref 15,
Ch 1/Ref
 2
4 Products and Participants Ch-1/Ref Assi
2 gnm
ent 1
5 Types of Members Ch-1/Ref
2
6 OTC Derivatives Markets Ch-1/Ref
2, Ref 17
7 Future Markets Ref 14,
Ref 10,
Ch-2/Ref
1, Ref 3
8 Forward Markets Ref 14,
Ref 10,
Ch-2/Ref
1
9 Types of Futures Ref 14,
Ref 10,
Ch-2/Ref
1, Ref-23,
Ref 5
10 Pay-off and profit and loss Ref 5
11 Option Trading Ch-2/ Ref
6, Ref 23,
Ref 24,
Ref 21
12 Types of Options Ch-2/ Ref Assi
6, Ref 23, gnm
Ref 24, ent 2
Ref 21
13 Pay-off and profit and loss Ch-2/ Ref Pay-off Charts,
6, Ref 23, Numerical
Ref 24, Problems
Ref 21
14 Option Pricing Ch 15/Ref
2
15 Index Derivatives Ch 8/Ref
2
16 Use of Futures Ch-5/ Ref
6, Ref 14
17 Use of Options Ch-2/ Ref
6, Ref 23,
Ref 24,
Ref 21
18 Speculation Ref 1
19 Structure and Policies for Risk Ch-6/ Ref
Management 2
20 Derivative Exposure
21 Nature and Types of Exposure Ch 7/Ref
 6,
22 Taking a Position Ch 17/Ref Quiz
2, Ref 19 1
23 Risk Vision Ch 7/ Ref Case Study 2
2
24 Managing Risk Ch 7/ Ref Assi
2 gnm
ent 3
25 Trading System Ch 16/Ref Dummy
2 Trading
26 Trading Hierarchy Ch 16/Ref
2
27 Market Watch and Inquiry Ref 1, Ref
Windows 18
28 Clearing Ref 1, Ref
4, Ref 20
29 Entities, Members and Banks Ref 1
30 Settlement Ref 1, Ref Dummy
20 Trading
31 Settlement of Institutional Ref 1, Ref Assi Dummy
Deals 4 gnm Trading
ent 4
32 Regulatory Mechanism Ch-
6/Ref2,
Ref 20,
Ref 18
33 SEBI Guidelines Ref 18
34 L. C. Gupta Committee Report Ref 1 Article Paper
35 J. R. Varma Committee Report Ref 1 Quiz
2
36 Winding Up
Additional material for spill over
1 Straddles and Spreads Ref 15 Numerical
Problems
2 Advanced Financial Ref 20
Derivatives
3 Beta, Trend Analysis and Ref 3,
Technicals Ref 4,
Ref 5
4 Derivatives Disasters and Ref 19,
Frauds Ref 20,
Ref 22,
Ref 23
5 FRAs and Swaps Ch 13/ Numerical
Ref 2 Problems
6 Trade Cycles and Derivatives Discussio Case Study 3
Markets n on latest and 4
monetary
policy
 Notes: 1. Use S. No of the reading above
2. To be filled in on the date of delivery of lecture by the instructor
3. Put assignment number from Assignment Table (below) against the lecture in which
planned to be assigned (by co-ordinator).
4. To be filled in on the date of assignment (by the instructor)
5. Do not write Lecture, OHP, LCD projector etc.

Details of Assignments Planned:

Assignment Details
No.
1 Discuss five types of derivatives Research-oriented
not listed or traded on any Indian
stock exchange.
2 Numerical problems on pay-off
calculations of puts, calls,
straddles and spreads.
3 Design a new derivative
instrument. Design a brief
regulatory framework for
effective trading in the new
instrument.
4 Calculate the bet a stock (based
on 50 readings collected during
the term). Also for the same
stock calculate the standard
deviation for the spot and the
future prices. Study the trends of
the stock in both the markets and
comment.
Term paper to be allotted by lecture no: 5
Nature of Expected outcome
Assignment
It will enhance the research
skills of the students and will
acquaint them with the wide
diversity of derivatives
products.
Practical This assignment will help the
students to understand the
mechanism behind investment
in derivatives. It will give
students the confidence to
invest in derivatives.
Practical and The assignment will not only
Analytical help the students to develop an
understanding of the current
derivative products, it will
foster their imagination too. To
attempt this assignment
students have to acquaint
themselves with the existing
regulatory environment and
suggest changes that will
enable the introduction of the
new product.
Practical The students will learn how to
keep a track of the market and
predict future prices based on
trend analysis.
Due date of term paper:2 wks before the close of term
Details of Cases Planned:
1 Shetty, Mayur, “A Hedge With
an Edge”
2 Harlalka, Deepak, “Future With
a New Option”
3 It will get worse before it gets
better, India Today, February 2,
2009
4 Law, Vivek, “Soft Touch
Kickstart,” Economy
Conceptual The case study explains how
financial crisis can be averted
with planned investments in
derivatives. It will enhance the
understanding of the student
with respect to the benefits
India can derive from
investment in derivatives.
Conceptual The case study explains the
importance of correct pricing
and volumes of new derivative
products. The study will
enhance the student’s
understanding of the regulatory
environment surrounding
derivatives.
Current Affairs The case examines the state of
the economy, the causes of the
slowdown and takes a look at
the year ahead.
Current Affairs Discusses the highlights of the
credit policy and how it is
framed.

Details of Quizzes Planned:

1 Basics of Derivative Trading Conceptual Will help in brushing the
student’s previous knowledge.
2 Settlement, Pricing and Conceptual Will help in brushing the
Regulatory Environment student’s previous knowledge.
Scheme of CA: (out of 100)

Component Frequency Marks out of 100

Attendance 10
Home work based tests / quizes 02 20
Assignments 04 40
Term paper 01 10
Lab performance (only if there is 02 20
a lab component)
Any other : specify
List of suggested topics for term paper [at least 15] (Student to spend about 15 hrs on any one specified
assignment)
S. No Topic
1 Critically analyze the Indian regulator environment of derivative trading and suggest
improvements to make trading more efficient.
2 Discuss in detail some of the major myths associated with derivatives trading.
3 Discuss in detail the derivative instruments which become popular in the bear as well as
the bull market.
4 Critically analyze the Indian derivatives market.
5 Compare the Indian derivative market with the derivative market of the US (with respect
to derivative products, regulatory environment and settlement mechanism).
6 Compare the Indian derivative market with the derivative market of the Japan (with
respect to derivative products, regulatory environment and settlement mechanism).
7 Compare the Indian derivative market with the derivative market of the China (with
respect to derivative products, regulatory environment and settlement mechanism).
8 Compare the Indian derivative market with the derivative market of the Russia (with
respect to derivative products, regulatory environment and settlement mechanism).
9 Compare the Indian derivative market with the derivative market of the Brazil (with
respect to derivative products, regulatory environment and settlement mechanism).
10 Assess the impact of globalization on derivative trading in India. Quote examples on how
the derivative system of different world economies has affected the Indian derivatives
market.
11 Critically analyze the factors which according to you have led to the popularity of
derivatives.
12 Which derivative instruments in your opinion are the most suitable for hedging risk in the
Indian trading environment?
13 What are the various positions that an investor investing in derivatives should take during
the various stages of a trade cycle?
14 How do bank derivative trading operations work?
15 What can be done to eliminate derivatives disasters and frauds?
16 Prepare a list of 20 Non-Indian Future Exchanges and discuss the type of future contracts
listed on them.
Proposed changes from the standard pedagogy for the course:

__________________________________________________
Prepared by (instructional planner: Name, Signature & date)

Comments of HOFD (Chief Academic Officer)

Signature & Date

Comments of Dean of Faculty

Signature & Date

 Report

Lectures: - (to be filled by the instructor and submitted at the end of term of HOS through HOD)

S. No Innovation introduced [ New pedagogy, new Topic and lecture number where
demonstration, case study, teaching aid, etc. introduced
NOT part of the instructional Plan

General Comments of the Instructor about the suitability of IP

Conduct of Tutorials

Tutorial Date Topics covered in the Activities (like quiz, case study, doubt
No. Tutorial clearing, any other)

Syllabus coverage report

Syllabus coverage by one week before MTE

Satisfactory / Lagging by ___ lectures.
Syllabus coverage by two week before ETE
Satisfactory / Lagging by ___ lectures.

________________________ ____________________
Signature of Instructors & date Signature of HOD & date