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Definatoin of

CA-ASPIRANT (CA-STUDENT ) (650 Points)

15 May 2009

Please explain following terms with example if it may possible.

Units :

Securities :

Derivatives:

Future options:

Thanks

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8 Replies

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 15 May 2009

Hi,

I have 2-3 PDF files serving as a guide on Equity,derivatives and Commodities..If u want,I can mail them to u.

pankaj (Advisor) (67 Points)
Replied 15 May 2009

mail the m to me also pankajbora83 @ gmail.com

CA-ASPIRANT (CA-STUDENT ) (650 Points)
Replied 16 May 2009

Please mail me on my e-mail i.d

amritesh.rai6 @ gmail.com

Sumit Jain (CA) (4760 Points)
Replied 16 May 2009

A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities (such as banknotes, bonds and debentures), and equity securities; e.g., common stocks. The company or other entity issuing the security is called the issuer. What specifically qualifies as a security is dependent on the regulatory structure in a country. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions.

Securities may be represented by a certificate or, more typically, by an electronic book entry. Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security, or registered, meaning they entitle the holder to rights only if he or she appears on a security register maintained by the issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable and fungible.

Sumit Jain (CA) (4760 Points)
Replied 16 May 2009

Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit.

The main types of derivatives are forwards, futures, options, and swaps.

Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.

Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet