1.

What is index Derivatives contract? Write its advantages.

Answer»
  • Index derivatives are derivative contracts which have the index as the underlying. 
  • The most popular index derivative contracts the world over are index futures and index options.
  • Index derivatives offer ease of use for hedging any portfolio irrespective of its composition.
  • Stock index, being an average, is much less volatile than individual stock prices. This implies much lower capital adequacy and margin requirements.


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