INTEREST RATE FUTURES – Part 2

Hello Friends, just an extension of our previous blog on interest rates futures where we touched upon the topic of interest rates future and what is it exactly.

Now we would understand that why is there need for interst rate futures and many more related aspects in this regard.

Here we go :

Why Interest rate futures?

Why Interest rate futures?

Why Interest rate futures?

The risk associated with the interest rate is uncertain and it never has been constant in the past, infact it would not remain constant in future also.

The volatility of interest rates has increased manifold in the last couple of years and recorded 17.40% in 2008 as compared to 8.51% in 2007.

This high fluctuation in volatility increases risk and requires tools to manage those risks.

Interest rate futures are the product for managing such interest rate risk.

🙂

Backbone of Interest Rate Future:

NSE, India’s largest stock exchange, began interest rate futures and offers the same reliable features as it provide to its other products with the following advantages:

Standardization and flexibility

•Price transparency and liquidity

•Leverage effect due to a wider collateral management

•Advance trading software and technological edge

•Centralized clearing supported by guaranteed settlement

🙂

Who can be a part of it?

The major market participants of interest rate futures are

•Banks and Primary Dealers

• Mutual Funds and Insurance Companies

• Corporate Houses and Financial Institutions,

•FIIs and NRIs

• Member Brokers and Retail Investors.

In Final part of this topic (which we would cover in our next blog), we would throw light on the benefits of the Interest Rate Futures and the future scenario related to Interest rate futures.

🙂

Stay Tuned 😉

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