Infolinks In Text Ads

Derivative:
Derivative is product whose value is derived from the value of one or more basic variables of underlying asset.

Forwards:
A forward contract is customized contracts between two entities were settlement takes place on a specific date in the future at today’s pre agreed price.

Futures:
A future contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Future contracts are standardized exchange traded contracts.

Options:
An option gives the holder of the option the right to do some thing. The option holder option may exercise or not.

Call option: 
A call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price.

Put option:
A put option gives the holder the right but not obligation to sell an asset by a certain date for a certain price.

Option price:
Option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium.

Expiration date:
The date which is specified in the option contract is called expiration date.

European option:
It is the option at exercised only on expiration date it self.

Basis:
Basis means future price minus spot price.

Cost of carry:
The relation between future prices and spot prices can be summarized in terms of what is known as cost of carry.

Initial margin:
The amount that must be deposited in the margin a/c at the time of first entered into future contract is known as initial margin.

Maintenance margin:
This is some what lower than initial margin.

Mark to market:
In future market, at the end of the each trading day, the margin a/c is adjusted to reflect the investors’ gains or loss depending upon the futures selling price. This is called mark to market.

Baskets :
Basket options are options on portfolio of underlying asset.

Swaps:
Swaps are private agreements between two parties to exchange cash flows in the future according to a pre agreed formula.


Impact cost:
Impact cost is cost it is measure of liquidity of the market. It reflects the costs faced when actually trading in index.

Hedging:
Hedging means minimize the risk.

Capital market:
Capital market is the market it deals with the long term investment funds. It consists of two markets 1.primary market 2.secondary market.

Primary market:
Those companies which are issuing new shares in this market. It is also called new issue market.

Secondary market:
Secondary market is the market where shares buying and selling. In India secondary market is called stock exchange.

Arbitrage:
It means purchase and sale of securities in different markets in order to profit
from price discrepancies. In other words arbitrage is a way of reducing risk of loss caused by price fluctuations of securities held in a portfolio.

Meaning of ratio:
Ratios are relationships expressed in mathematical terms between figures which are connected with each other in same manner.

Activity ratio:
It is a measure of the level of activity attained over a period.

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