A study of derivatives market (with reference to futures and options)

Abstract

To find the gap between what potential the derivative market offers & how much investors are aware & willing to take benefit of the same. In the era of growing importance of savings & investment, Derivatives is a source of investment & risk management tool which is not explored to its full horizons & capabilities. My study on focuses on 2 major types of derivatives i.e. futures & options, there risk & return profiles & the investment motives & returns that investors have earned from their investment. It analyses the gap between the potential of derivatives market & how much are investors able to take the benefit of the same. The derivatives market, its functionality, practical approach & implementation is studied by considering 3 sectors - Fashion and Retail Industry, Financial Services and IT Industry & 3 industries in each of these 3 sectors. A primary data is also collected by collecting responses from investors via a Questionnaire. The questions in the Questionnaire were related to investors awareness, their risk appetite, their choice of derivative investment & returns earned by them in their investments. The primary & secondary data is then compared & based on this suggestions & findings of the study are given in this report. The result of factoral anova test shows that there is an interaction present between the no. of times an investor invests & the risk capacity possessed by him / her. The chi-square test shows that there is a relationship between the income & investment pattern of investors. So, it is identified from the study that there is a huge gap between what the derivative market has to offer, its potential and investor perceptions & choices in the market & investors awareness about this market.