Don’t miss these things about the Indian derivatives market

The concept of derivatives is said to have originated in 12th-century Europe. The farmers and traders wanted to protect themselves from financial losses. Hence, they would hedge their produce against future price fluctuations. Today, derivatives have evolved into a legitimate type of security, leveraged by investment bankers to generate wealth and mitigate risk.

An example of derivatives can be seen in the film “The Big Short”, which is set against the subprime crisis of 2008. Financial companies had developed a housing mortgage product that received a high rating from renowned credit rating agencies. Yet, a few investment bankers designed derivatives that bet against the success of the housing mortgage product. When the housing markets finally crashed, these investment bankers made billions of dollars for their clients and themselves.

In this blog, we understand more about derivatives and how pursuing a derivatives markets course can be a stepping stone for ambitious finance professionals looking to carve a niche in the world of investment banking.

What are derivatives?

Derivatives are essentially financial contracts between two or more market players. The derivative derives its value from an underlying asset or group of assets, which can include securities such as stocks, mutual funds, bonds, money market instruments, and home loan products, to name a few. The players consist of hedgers and speculators.

The hedgers own the assets, and they aim to transfer the future price fluctuation risk. The speculators need not own assets. However, based upon predictions of future price fluctuations of the underlying assets, they take positions in the contracts based on their prediction of how the asset will perform.

Snapshot of derivatives in India

The derivatives market in India has its origins in 1875 when the Bombay Cotton Trading Association engaged in futures trading. This is a type of contract between a buyer and seller with a future expiration date. Derivatives in their contemporary form only kicked off on the Bombay Stock Exchange (BSE) after 2001 and the National Stock Exchange (NSE) in 2000. Today, the following derivatives exist in the Indian financial markets.

Forward contract

This is a customized contract between parties concerning buying or selling an asset at a specified price on a predetermined future date. There is no monetary transaction at the time of creation, and profits and losses are booked only on that future date. Assets can include gold.

Futures contract

This is similar to a forward contract. The main difference is that a futures contract can only be based on stock market exchanges.

Options trading

This type of derivatives contract gives a party a right but not the obligation to buy or sell a specific stock, bond, mutual fund, or another asset at a specific price on a particular date.

Swaps

This type of derivative contract between two parties involves an exchange of cash flows over time. Parties make a profit or loss based on whether a specific financial instrument price rises above or goes below a specific reference point.

Intrigued enough to want to learn about the derivatives market? 

Become a derivatives expert

In the banking world, investment bankers continuously study the market and learn how to leverage derivatives to create wealth and mitigate risk for their clients as part of their job roles. If you want to be a part of this dynamic world, then pursue an investment banking course with placement opportunities. Here’s my advice on choosing the right program:

Always go for a program that comes with a legitimate certification. Recruiters have limited time to go through various resumes and online profiles. However, a certification grabs their attention instantly. For instance, a Euronext Group certification is recognised as a gold standard by the finance industry.

Ensure that the curriculum is up-to-date and aligned with the industry’s needs

Live training must be a part of the program. These simulations allow you to translate theoretical concepts into a hands-on engagement.

Last but not least, go for a program with a robust placement framework. Career services, such as resume building and job interview training, come in handy because investment banking is such a specialised field.

In Conclusion

Once you have successfully completed your program and have joined the world of investment banking, you can also go on to pioneer innovative derivative products. Success in the world of investment banking not only comes with adequate compensation but recognition for your innovative ideas and opportunities for fast career growth up the corporate ladder.

To know about Imarticus’  Certified Investment Banking Operations Professional, contact us through chat support, or drive to our training centres in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, Gurgaon, or Ahmedabad.

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Permission Markets of Derivatives: An Overview

The derivatives market is a conglomeration of financial instruments that derive their value from an underlying asset, known to be derivatives. These derivatives may take the form of commodities, swaps, caps, floor, collars, and of course, the most popular ones are futures and options. It is a massive industry altogether that is highly regulated due to its high-risk element but is also quite appealing due to its potential for soaring high returns.

However, it shall not be an exaggeration to state that investing in derivatives is not money for old rope. To the real-time investors who are acquainted with the physiognomy of commercial trading, they will tell you what a spin it is to invest in derivatives. The derivatives market is said to be one of the riskiest forms of investment and is known to be a complex subject matter. Therefore it becomes vital for real-time investors to explicitly understand what they are diving in, specifically at the pioneer stage of their investments.

So, What should an Investor do?

Now, this may appear to be intimidating but is not completely unfathomable. An investor just needs to understand the tricks and tackles of the trade. Well, as far as the common opinions of first-time investors suggest, the best way to do so is to opt for a course on the derivative markets via online training. The foremost advantage of considering online training for derivative markets is that you can train under industry experts.

And this can be easily done by sitting at home. You can conveniently apply the fundamentals learned and then upgrade your skills based on the expertise gained in the field. This shall help you to become an active participant in the market and understand the ballgame with a closer look.

A Career in Derivative Market

By now we have gathered that the derivative market offers lucrative options for you as an investor, but it shall be interesting to note that it provides a plethora of opportunities in terms of job prospects. To the ones considering a career in the derivative market, the following are some of the popular roles that you can consider as thriving options:

Derivative Operations Analyst

This role is highly sophisticated and provides you with high exposure to the market. An individual looking to work as a derivative analyst must be well-equipped with the working mechanism of trading in derivatives. The essential part of your job shall be to work in the capital market division and play around with the profit and loss reports of such trades.

The average median salary as per reports is suggested to be around $56000 and the role requires a basic qualification in the field of finance such as a BCom or MBA in finance.

Derivatives Trader

The traders do the business for their companies/firms. They help to create a market by supplying bids and offering quotes for all financial products. To make a career as a trader, an individual must have analytical skills and shall be vigilant enough to make smart trading decisions.

With the growing economy, this profession has a growing potential in-store and can be one of the best options for the ones who like the thrill of trading in the derivatives market. As derivatives traders, you all can earn an average income of about $ 93,517 p.a. However, the candidate needs to have an impeccable academic record and experience in the field of investing as far as the qualifications are concerned.

Derivatives Risk Analyst

With the industry currently being at its peak, there is a huge demand for risk professionals in the field. As a derivative risk analyst, one is expected to create efficient strategies to mitigate the risk involved in the field and widen the horizon of returns. It involves a command of research skills and a thorough market understanding. A huge part of this job involves building back-end plans for the respective firms and consulting them on their market standing.

As far as numbers are concerned, the salary offered to the risk analyst falls around $57,192 on average. Also to qualify as a derivative risk analyst is expected to have programming skills as well as a degree in finance from top-tier universities.

The derivative market is filled with both positive and negative notions. Ones who are well-equipped with the current economic patterns will agree that being ignorant of the idea of this market is like falling into the death trap in terms of investment. Also, someone who is looking to make a career in the field must be aware that with the growing potential of the industry, it is equally essential to ameliorate the related skills, perhaps an Investment banking course can be the best near-at-hand solution for you.

Investment banking courses offer a spectrum of information on finance, derivatives, stock-market trading, etc, and act as a step way to career development in the investment business. And this is what we can claim to be the need of the hour!