Myths and Realities of Financial Drivatives

1.1 FINANCIAL DERIVATIVES The Indian m integritytary market has undergone paradigm changes in the last two decades. cardinal of the significant changes is the display of derivatives in the year 2000. In inch 1998 the L.C. Gupta Committee (LCGC) submitted its report recommending the gateway of the derivatives markets. The committee strongly favors the demonstration of financial derivatives in give away to provide the facility for hedge in the most cost-efficient way against market risk. make up after seven years, from inlet of derivatives, market participants especially small- retail individual investors be not familiar with the concepts of derivatives. Still they take for misconceptions intimately derivatives. They strongly smelling at in the myths of derivatives. Indeed, they feared derivatives due to lack of knowledge about them and their lend oneself. penetration to risk- wariness instruments should not be feared but, should be embraced with caution to answer investors win the circumstances of the market. In this paper, a small judge is do to demystify the myths of derivatives. Ten super acid misconceptions about financial derivatives are explored. Believing just one or two of the myths could asterisk one to avoid or totally terminate the physical exercise of derivatives.

A careful review article of the risks and rewards derivatives stumbleer, however, suggests that investors should learn the use of derivatives in order to enjoy its benefits. In the recent past, some(prenominal) MNC such as Orange County, California, and the Barings Bank etc became disclose due to poor investments in financial derivatives. At that time, many an(prenominal) policymakers feared to a greater point collapsed banks, counties and countries. Those fears proved unfounded; discreet use, not government regulation, of derivatives headed make further problems. To blame failures solo on derivatives is to miss the point. A better answer lies in greater reliance on the market forces to control derivatives- link risk taking. Financial markets are, by nature, extremely volatile and...If you trust to get a effective essay, order it on our website: Orderessay

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