From Hedging to Speculation

Business models across the world have been changing to meet the opportunities and challenges posed by economic globalization. New markets, products, technologies and practices have been evolving across the world to meet the ever-growing business needs. Present liberalized market economies featured by stiff competition and attractive growth prospects call for large investments in vanous sectors With rapid economic development and mdustnal growth, capital market is now gaining significant momentum Well-established capital market is a sine-qua-non for growth economies Capital market establishes the link between demand for and supply of long-term capital

requirements An active capital market is thus the vital element of financial system of a country World wide, the financial system is in the process of modifying itself through innovation that produces new financial instruments Interestingly, the financial instruments also increased the risks associated with mobilizing as well as repaying the capital The financial engineers developed various instruments to address the new types of risks. One of the innovative risk management instruments of the present times is derivatives As the Nobel

laureate economist, Merton Miller rightly observed, 'financial futures represent the most significant financial innovation of the last twenty years