Parking Cash Smartly: Liquid Funds vs Ultra-Short Term Funds Explained
Liquid funds and ultra-short term funds are both SEBI-defined debt mutual fund categories designed for short horizons, but they differ mainly in portfolio duration, liquidity mechanics, risk-return profile, and use-cases for treasury and personal cash management. Definitions and portfolio Investment horizon Liquidity and redemption Risk sensitivity Return potential and volatility Costs and loads Operational…
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Option Valuation: Models, Greeks, and Volatility Surfaces
(Step‑by‑step practical examples for the key formulas and relations used in option valuation, using plain numbers and intuitive explanations) Option valuation estimates the fair value of an option by modeling expected payoffs under risk‑neutral probabilities and discounting at the risk‑free rate, with price sensitivities captured by Greeks and implied volatility extracted from market prices for…
Read article Swaps: Definitions, Mechanics, Valuation, and Interest Rate Applications
A swap is an over-the-counter derivative in which two parties agree to exchange cash flows based on specified terms for a defined period, typically without exchanging principal and with cash flows computed on a notional amount. Swaps allow participants to transform the nature of their assets or liabilities (e.g., from floating to fixed interest) and…
Read article Options: Definitions, Pricing, and Interest Rate Applications
An option is a derivative contract that grants the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified strike price on or before a stated expiration date, in exchange for a premium paid to the seller (writer) of the option. Option terminology Call option A call option…
Read article A practical guide to futures: structure, pricing, and settlement mechanics
(This article presents how futures differ from forwards, why clearing and margining matter for performance assurance, how pricing links to carry and yield curves, and how settlement conventions and market structure shape real-world hedging and trading outcomes.) A futures contract is a standardized agreement traded on an exchange to buy or sell an underlying asset…
Forward Contract: Definition, Pricing, Payoffs, and Practical Use
IntroductionA forward contract is a customized agreement between two parties to buy or sell an asset at a predetermined price on a specified future date, widely used for hedging price or rate risk in commodities, currencies, and interest rates. It is an over‑the‑counter (OTC) instrument, typically with bilateral credit exposure and flexible terms tailored to…
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