Practical Derivatives-himalaya

Due to globalisation and liberalisation processes initiated by the states all over the world, the international trade and financial activities have grown multifold resulting in rising level of all types of risks for market participants such as market risk, interest rate risk, foreign exchange risk, inflation risk and price risk. During the last few years, a number of new financial instruments have assumed significance in the Indian economy. With rapid globalisation, this trend is likely to accelerate in future. Derivatives are a kind of financial instruments whose values change in response to the change in specified interest rates, security prices, commodity prices, index of prices or rates, or similar variables. Typical examples of derivatives are futures and forward contracts, swaps and option contracts.

This book shows how to quantify financial risks and manage them. For a firm, the ability to manage risk is a source of competitive advantage. In particular, firms that manage risks well are better able to take advantages of growth opportunities. Derivatives are the instrument of choice to manage financial risks, and it is therefore, critical for managers to understand how derivatives can be used to manage risks. Equity index futures, equity stock futures, equity index options and equity stock options are traded on some major stock exchanges. For instance, in case of equity index futures and equity index options, the National Stock Exchange of India Limited (NSE) and the Stock Exchange, Mumbai (BSE) have introduced trading in S&P CNX NIFTY index and BSE SENSEX, respectively. In the case of equity stock futures and equity stock options, NSE and BSE have introduced trading in certain securities specified by the Securities and Exchange Board of India (SEBI).

This book deals with accounting treatment of equity index futures, equity stock futures, equity index options and equity stock options (hereinafter collectively referred to as ‘Equity Derivative Instruments’) from the viewpoint of the parties who enter into such contracts as buyers or sellers.

Second part of this book deals with accounting for financial instruments. Accounting for financial instruments under IFRS is complex. Entities should take the time to understand the requirements, including the impact on systems, processes and documentation. This book provides an overview of revised IAS 39 and IFRS 7 and Ind AS 39 on financial instruments.

This book contains practical approach to understand Futures and Options and explains how to apply the complex standards on financial instruments. The views expressed in this book are of author’s own. This book is useful for those who do business in Futures and Options and Stock Exchanges, and for Brokers. This book is also useful for practicing Chartered Accountants / Cost Accountants / Company Secretaries / Professionals / Research Institutions / Companies / Businessmen and C.A. Final Students. This book is also useful for teachers and students of finance, commerce, and management like MBA, PGDBM, M.Com, MFC, MBE and MFM. This book is also useful for derivatives practitioners like equity researchers, portfolio managers, financial executives, analysts, investors, policymakers and risk managers.

Contents :

Part-I : Derivatives
1. Derivatives Market in India
2. Commonly Used Derivatives
3. Options-An Introduction
4. Currency Options
5. Currency Swaps
6. Futures-An Introduction
7. Futures-Advanced Problems
8. Forward Contract
9. Nature of Equity Derivative Instruments
10. Commodity Derivatives
11. Financial Derivatives
12. Trading in Equity Derivative Instruments
13. Interest Rate Derivatives
14. Interest Rate Swap
15. Hedge of Foreign Exchange Risk
16. Manage Currency Risk by Derivatives
17. Practical Questions and Answers on Options, Financial Derivatives, Futures and Swaps
18. Accounting Aspects of Derivatives
19. Taxation Aspects of Derivatives
Part-II : Financial Instruments
20. Financial Instruments (Ind AS 39, IAS 39 and AS 30)
21. Financial Instruments-Questions and Answers