Feature New

8/8/2019 Feature New

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FEATURES

Group Members Roll No.

Mr. Sunil Yadav 1460

Mr. Prasad More 1432 Mr. Jagdish Sansare 1443

Mr. Mangesh Karve 1420

Mr. Rakesh Sharma 1445 Mr. Aves Khan 1421


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STOCK INDEX FUTURES, HISTORY I.

Trading began on February 24, 1982, when the Kansas CityBoard ofTrade introduced futures on the Value Line Index.

About two months later, the Chicago Mercantile Exchange

introduced futures contracts on the S&P 500 index.

By 1986, the S&P 500 futures contract had become the

second most actively traded futures contract in the world,

with over 19.5 million contracts traded in that year.

In May 1982, the NYSE Composite Index futures contract

began trading on the New York Futures Exchange, the NYFE.


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STOCK INDEX FUTURES, HISTORY II.

In July 1984, the Chicago Board ofTrade began trading

futures contracts on the Major Market Index (MMI).

Dow Jones and Company went to court to block its

attempts to trade futures on the Dow Jones

Industrial Average (DJIA)

But, in June 1997, Dow Jones and Company agreed to

allow DJIA options, futures, and options on futures to

begin trading.


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,

INDEX FUTURES CONTRACTS HAVE HAD A

GREAT IMPACT. T

rading in stock index futures has allegedly made theworld's stock markets more volatile than ever before.

Critics claim that individual investors have been driven out

of the equity markets because institutional traders' actionsin both the spot and futures markets cause stock values togyrate with no links to their fundamental values.

Many political figures have called for greaterregulation, going so far as to favor an outright ban on stockindex futures trading.

Fortunately, such extreme measures have been avoided.


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2 IMPORTANT DETAILS

A futures contract on a stock market indexrepresents the right and obligation to buy or tosell a portfolio of stocks characterized by theindex.

Stock index futures are cash settled.

That is, there is no delivery of the underlying stocks.

The contracts are marked to market daily.On the last trading day, the futures price is set equal to

the spot index level and there is a final mark to market

cash flow.


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Interest Rate Currency Equity index Commodities

Series1 55% 5% 25% 15%

0%

10%

20%

30%

40%

50%

60%

Global Features Markets


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COMMODITY FUTURES

Agricultural (CBOT, NYBOT, NCDEX, MCX)

Energy (Nymex, NCDEX & MCX

Metals (CBOT)

INDIVIDUAL EQUITY FEATURES

2001- Single Stock Features


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STOCK INDEX FEATURES

First index features 1982

CURRENCY FUTURES

First currency features - 1972


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FUTURES ON GOVT BONDS, NOTES &

BILLS

Invoice amt= contract size * futures settlement

price * conversion factor + accrued int.

Accrued Int.= (coupon/2)*(No. of days sincelast coupon payment/No. of days in a coupon

period)

Conversion factor= present value at 6% yield of

the delivered bond per $1 of per value


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CASH SETTLED INTEREST RATE

FUTURES

The Eurodollar futures contract is based on a 3-

month Libor with a national value of $1 million.

A one basis point change in the int.

rate, therefore, affects the contract valued by

0.01*1%*1/4*$1000000=

1/10000*1/4*$1000000=$25


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WHAT IS AN INDEX?

An index is, in one sense, just a number that is computedin order to measure the value of a portfolio of stocks.

Other indices have been constructed to track the values ofother types of securities, such as bonds and futures.

Still other indices track such economic indicators as the

consumer price index (CPI) or the index of leading indicators.

When constructing a stock market index, three issues areof particular interest:

which stocks are in the index how each stock is weighted

how the average is computed

We will describe three different stock market indices.


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