Chapter-1

1. Future trading commenced first on Chicago Board of trade.

2. Derivative first emerged as hedging product.
3. National Commodity Derivatives Exchange offers commodity derivatives trading.
4. OTC derivatives are considered risky because there is no formal margining system.
5. The first exchange traded financial derivative in India commenced with the trading of
Index future.
6. A Forward is the simplest derivative contract.
7. In a transaction, trading involves the buyer and seller agreeing upon a price.
8. In a transaction, clearing involves the buyer and seller exchanging goods and money.
9. In a transaction, settlement involves the buyer and seller calculating the net outstanding.
10. A forward contract is an agreement between two entities.
11. Future contracts are standardized and exchange traded.
12. Longer dated options are called warrants and are generally traded over the counter.
13. Participants in the derivatives market are – hedgers, speculators & arbitragers.
14. Derivative markets can broadly be classified as commodity derivative market and
financial derivative market.
15. Commodity derivatives market trade contracts for which the underlying asset is a
commodity like agricultural commodity or precious metals.
16. The more popular financial derivatives are those which have equity, interest rates, foreign
exchange as the underlying.
 Chapter-2

1. Physical settlement involves the physical delivery of the underlying commodity at an

accredited warehouse.
2. Typically, in all commodity exchanges, delivery notice is required to be supported by a
warehouse receipt.
3. The clearing corporation identifies the buyer to whom the delivery notice is assigned.
4. National Stock Exchange does not offer commodity derivative trading.
5. The Kabra Committee recommended that the forward market commission (FMC) and the
forward contract (regulation) Act, 1952, need to be strengthened.
6. A seller of a commodity future has the option to give notice of delivery during a period
identified as ‘delivery notice period’
7. Whenever delivery notices are given by the seller, the clearing corporation identifies the buyer to
whom the delivery notice is assigned.
8. The issues faced in physical settlement of commodities are varying quality of assets, warehousing,
interstate movement of commodities, state level octroi and duties.
9. Any seller/buyer who has who has given intention to deliver/been assigned a delivery has an option
to square off positions till the market close of the day of delivery notice.
10.