Interest Rate Derivatives, Financial Management

Interest Rate Derivatives:

India's first trading on interest rate derivatives began in the National Stock Exchange of India (NSE) in June 2003 with futures on 91-day treasury bills and a 10 year notional bond. Trading in the Mumbai Inter-Bank Offered Rate (MIBOR) and other instruments would also be introduced subsequently. The first day of the launch (June 24, 2003) started with 4 trades of Rs.25 crore each, involving two deals on the 10-year zero-coupon bond and two others on a 91-day bill.

The list of securities on which futures contracts would be available and their symbols for trading are as follows:

Symbol Description

NSETB91D Futures contract on notional 91-day T-bill

NSE10Y06 Futures contract on notional 10-year coupon bearing bond

NSE10YZC Futures contract notional 10-year zero-coupon bond

NSE defines the characteristics of the futures contract such as the underlying security, market lot and the maturity date of the contract. Interest rate futures contract shall be for a period of maturity of one year with three months continuous contracts for the first three months and fixed quarterly contracts for the entire year.

Minimum lot size for the interest rate futures contracts is fixed at 2000. To start with, the minimum value of a interest rate futures contract would be Rs.2,00,000. Base price of the interest rate future contracts on introduction of new contracts would be theoretical futures price computed based on previous day's closing price of the notional underlying security. The base price of the contracts on subsequent trading days will be the closing price of the futures contracts. There is no day minimum/maximum price ranges applicable for the futures contracts. But for practical purposes, operating ranges for interest rate futures contracts will be kept at ±2% of the base price.

 

Posted Date: 9/10/2012 8:52:48 AM | Location : United States







Related Discussions:- Interest Rate Derivatives, Assignment Help, Ask Question on Interest Rate Derivatives, Get Answer, Expert's Help, Interest Rate Derivatives Discussions

Write discussion on Interest Rate Derivatives
Your posts are moderated
Related Questions
Advantages and disadvantage of pacipatory style of budgeting

Which type of financing is appropriate to each firm?

Explain how a firm determines the optimal level of current assets. The best possible level of working capital is determined by finding the amount that balances the need for liq

Capitalization ratios are used for determining the extent to which the corporation is trading on its equity, and the resulting financial leverage. These ratios

The Option-Adjusted Spread (OAS) is a measure of the yield spread (expressed in basis points) which can be used to convert differences between the values an

QUESTION Part A: 1. Nev Plc is considering to invest in a machine to manufacture a new line of umbrellas. The following data has been assembled in respect of the investment:

Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Compute value after three years.

IMPORTANT FACTORS FOR  SUCCESSFUL BUDGETARY CONTROL 1. Clearly defined organization structure. 2. Top management support. 3. Reporting of deviations 4. Efficient acco

Profitability Index (PI) : It is a ratio of the present value of the total cash benefits to the present value of the net cash outlay.  The higher the PI, the higher the return.

a)   What are the pre-requisites of installation of responsibility accounting system? b)  Diffrence between 'cost centre' and 'profit centre'.