Asset Management - IC-99 Exam Study Notes

The higher the maturity profile of the instrument, higher is the interest rate risk.
As per Section 2 of the securities contracts (Regulation) Act 1956 "Derivative" includes : a) A security derived from a debt instrument, share, loan whether secured of unsecured, risk instrument or contract for differences or any other form of security. b) A contract which derived its value from the price, or index of prices at underlying securities.
As per Accounting standard SFAS 133 "a derivative instrument is a financial derivative or other contract which will comprise of all three of the following characteristics : a) It has one or more underlying asset, and one or more notional amount or payments provisions or both. Those terms determine the amount of the settlement or settlements,
b) It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contract that would be expected to have a similar response to changes in market factors. c) Its terms require or permit net settlement. It can be readily settled net by a means outside the contract or it provides for delivery of an asset that puts the recipients in a position not substantially different from net settlement.
A swap is defined as the exchange of one stream of future cash flows with another stream of cash flows with different characteristics.

Important Points for IC 99 - Asset Management Exam