BASICS OF DERIVATIVES | Dr. Aditya Sontakke | Author & Finance Expert | T-Talk Ek Boond Soch Ki

Part 7 of 11 Episodes with Dr. Kaustubh & Dr. Aditya Sontakke Author & Finance Expert on T-Talk Ek Boond Soch Ki shares his journey about his experience about the basics of derivatives

Thank you once again we are back on eggman sochi talk train of thought with a series of episodes with dr aditya suntake i think having an experience of 14 years into the financial aspects uh author and expert in finance and you have written around about six books and it’s an exciting journey what we have seen uh in our last episode we have covered in aspects

Of sir one of your book uh in terms of an simplest approach to financial management one second back to this game uh now in fact when we talk in terms often derivatives dr aditya what are the basis of the derivatives uh derivative is basically a hedging tool risk management tool wherein we have various tools like options futures forwards swap so we can use these

Various tools to mitigate our risk in a business or even if you are individual investor you can mitigate your risk of investment by using this various tools okay and what are these options all about okay option is a tool very now a particular person has an option for example uh let’s say uh if i come to you and ask you for a pain like i tell you that i want to buy

A pain from you for this 10 and after one month let’s say so uh i will have an option whether i want to fulfill this contract or not fulfill this contract like if i want i’ll come to you after one month for buying this pen and if i do not want this pen i’ll not come to you after one month so that option is with me so if you see the whole transaction i am having an

Age over the whole transaction i’m having an advantage i am having options of fulfilling the contract or not fulfilling the contract and for this for buying this option i will have to pay you a premium a front premium that is called as option premium so the question is how much premium i should pay to you yeah so there are various methods available to find out uh

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How much option i should pay you based on the strike price okay so this is the tools are like there is binomial model it is a black shields model it is a put called parity theorem which tells you how much premium i should pay you okay so these are the various tools available to find out the option premium that is called as the option valuation good and uh for the

Benefit of a target audience like can you throw some light in terms of future in the forward if basically it was a previously we had a forward contract wherein uh it is a forward contract let’s say between you and me wherein i’m directly coming to you and let’s say asking for a pain from you like i’ll tell you we will have a contract wherein uh the contract terms

Are after a one month i will buy this pen from you at rupees 10 okay so in this case if you see the forward contract there is no one between us okay i’m directly approaching you and directly making a contract uh with you okay so in the forward contract there are a chances of getting the contract defaulted either from your side or from my side i say yeah so uh future

Contract is a standardized form of a forward contract wherein uh even if we are getting into the contract but we will not know each other because there is a stock exchange in between okay so we will do the contract through stock exchange so basically it’s a forward contract but a standardized forward contract wherein the stock exchange is there in between so the

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Default risk is very low i see yeah because there is a stock exchange to take care of the whole process good good i think the most simplified concept what you have explained for t-talk audience now can you throw some writing terms of an interest and the currencies to apply yeah currency will basically swap agreement is again to mitigate the risk let’s say if we

Are talking about the interest rate rates like uh let’s say i’m in india and you are in the us you are applying for a loan i am also applying for a loan but you are taking fixed interest rate loan i am taking floating interest rate loan but afterwards i have paid it instead of taking floating interest rate loan i should have gone for fixed interest rate loan and

Then you are feeling the same like you had taken fixed interest rate loan but now you are feeling that i should have gone for a floating interest rate loan okay so our uh needs are getting matched so we will come into a contract wherein ultimately we will end up paying our banks whatever the interest rate loans that like structure that we have taken but ultimately

We will come to a contract through a swap agreement where wherein i will end up getting for floating and you will end up getting fixed interest rate alone good uh great again the most simplified expression of concept in terms of an interest and the currency and what you have to say about uh currency future and the currency option for titoc audience please again

Yeah currency future and currency option these are again the tools available to mitigate the risk especially uh nowadays the companies are multinational so they are exposed to a foreign exchange deals they are exposed to the foreign exchange so uh there is always a risk of appreciation or a depreciation of foreign exchange so to reduce that risk or to remove that

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Risk we have various tools in a forex also so one of that is currency options and currency futures wherein we can reduce our risk completely good okay i think dr aditya along with your brother dr kosovo you have come up with a beautiful uh simplest approach to a derivatives a book i think which i’m sure which simplifies the concept if one look into the derivatives

The specs which are there uh both of you your elder brother doctor k and yourself have put a beautiful concept and tattoo while working uh on the crisis when the crisis was your pandemic you came with a beautiful concept giving back to and society and in the early episode no you did spoke about your book simplest approach to financial management and now again as

Simple as a personal derivatives which i’m sure even the target audience the students or the practitioners who are listening to us i think they can go through a particular book it’s all available on the amazon and they can go and buy and can and teach themselves with the word of and wisdom and the knowledge for finance which are concerned thanks a lot for your

Presence on this tree talk show and if you like dr aditya’s son take on uh tea talk just go subscribe and like the channel as much as you can and there’s a comment box i think if you can put your comment the more client in terms of and finance dr aditya suntake and dr kosovo will willingly uh they will address your questions if any if it is there uh

Till then watch out uh uh dr aditya in our next episode thank you very much so thanks a lot from part of this thank you very much foreign

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BASICS OF DERIVATIVES | Dr. Aditya Sontakke | Author & Finance Expert | T-Talk Ek Boond Soch Ki By T-Talk