An Impact of Derivatives on the volatility of NSE, India.

  • Dr. Seema Thakur Assistant Professor SGT University, Gurugram

Abstract

fi eld of fi nance. It is the most desired instruments that allow market participants to manage
risk in the modern securities trading are known as derivatives. The derivatives are defi ned
as the future contracts whose value depends upon the underlying assets. If derivatives are
introduced in the stock market, the underlying assets may be anything as component of
stock market like, stock prices or market indices, interest rate etc. The main logic behind
derivatives trading is that derivatives reduce the risk by providing an additional channel
to invest with lower trading cost and it facilitates the investors to extend their settlement
through future contracts. It provides extra liquidity in the stock market. In recent past, the
volatility of stock returns has been a major topic in fi nance literature. Generally, Volatility
is considered as a measurement of risk in the stock market return and a lot of discussion
have taken place about the nature of stock return volatility. Therefore, understanding
factors that affect stock return volatility is an imperative task in many ways. Stock prices
and their volatility add to their concerns of attention in the stock market, especially in
India. The volatility on the stock exchange may be thought of a s having two components:
The volatility arising due to information based price changes and volatility arising due to
noise trading/ Speculative trading, i.e. destabilizing volatility. As a concept, Volatility is
simple and intuitive.
Keywords: NSE, Derivatives, fi nancial market, .Financial billfold, Volatility.

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Published
2019-09-30
Section
Articles