Derivatives Latest News
IndusInd Bank reported derivative losses of ₹2,100 crore on March 10, 2025, leading to a 23% decline in its share price.
About Derivatives
- Financial contracts whose value depends on an underlying asset, index, or rate.
- Used for hedging risks, speculation, and portfolio diversification.
- Common underlying assets: Stocks, bonds, commodities, currencies, interest rates, and market indexes.
Types of Derivatives
|
Derivative Type |
Definition |
Example |
|
Futures |
Contract to buy/sell an asset at a fixed price on a future date. |
Commodity traders hedging against price fluctuations. |
|
Options |
Gives the right (but not obligation) to buy (call) or sell (put) an asset at a set price before a deadline. |
Stock options in equity markets. |
|
Swaps |
Agreements to exchange cash flows based on financial metrics. |
Interest rate swaps to reduce borrowing costs. |
|
Forwards |
Private agreements (OTC) to buy/sell assets at a future date. |
Currency forward contracts for importers/exporters. |
Exchange-Traded Currency Derivatives (ETCDs)
- Standardized contracts allow investors to speculate on future currency exchange rate movements.
- Traded on stock exchanges, unlike Over-the-Counter (OTC) derivatives which are private.
Derivatives FAQs
Q1: What are derivatives in the financial market?
Ans: Derivatives are financial contracts whose value is derived from an underlying asset such as stocks, commodities, currencies, or interest rates.
Q2: Why are derivatives important?
Ans: Derivatives help in risk management (hedging), price discovery, and improving market efficiency.
Q3: What are the risks associated with derivatives?
Ans: Derivatives carry risks such as market volatility, counterparty default, and speculative losses.
Q4: What is the role of SEBI in regulating derivatives in India?
Ans: SEBI (Securities and Exchange Board of India) regulates derivatives trading in stock and commodity exchanges to ensure transparency and reduce market manipulation.
Source: IE
Last updated on June, 2025
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