Important Points for IC 99 - Asset Management Exam
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In 2014 The Insurance Regulatory and Development Authority (Irda) has allowed insurers to invest in interest rate derivatives for hedging against interest rate risks in their transactions.
Some of the uses of derivatives include : Financial risk management, Price discovery, Liquidity and reduced transaction costs, Measurement of market, Efficiency in trading, Speculation and arbitrage, Hedging.
A forward contract is a customised contract between two parties / entities, where settlement takes place on a specific date in the future at the agreed price.
A "futures" contract is an exchange traded forward contract to buy or sell a predetermined quantity of an asset on predetermined future date at a predetermined price.
Call option gives the buyer the right but not the obligation to buy a given quantity of the underlying asset at a given price on or before a given future date.
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