A Study on Derivatives Markets in India

Most commodities and capital markets are characterised by risk. Risk management is more important than ever before in today’s extremely confusing corporate environment. The advent of the derivatives market is a smart financial engineering effort that gives an effective and less expensive solution to the problem of risk that is embedded in the price volatility of the underlying asset. The growth and progress of the derivatives market in India is a relatively new phenomenon. Since its start in June 2000, the derivatives market has grown exponentially in terms of both volume and quantity of traded contracts. Financial derivatives are financial products or instruments whose prices are determined by the prices of their underlying assets. To control such risk, it is therefore critical to build a set of new financial instruments called as derivatives in the Indian financial markets. The primary goal of these instruments is to provide price commitments for future dates in order to provide protection against adverse price fluctuations in order to limit the number of financial risks. Financial derivatives are growing popular and widely employed in the world of finance today. This has spread so quickly over the world that it is now known as the derivatives revolution. The emergence and growth of the derivatives market in India is a relatively new phenomenon.