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…
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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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Derivatives Demystified: Meaning, Features, Uses, Misuse, and Market Overview
A derivative is a financial contract whose value is linked to an underlying asset, index, rate, or benchmark; it is used for hedging risk, speculation, and arbitrage, and trades either on exchanges or over the counter depending on standardization and customization needs. What is a derivative? A derivative is an agreement between parties that derives…
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FEMA Provisions on Assets Held Outside India
Under the Foreign Exchange Management Act (FEMA), 1999, special provisions apply to assets held abroad by persons resident in India. These rules regulate ownership, transfer, and investment in foreign assets, ensuring legal compliance and preventing unauthorized holdings. Key Provisions 1. Section 4 of FEMA * Prohibits residents from acquiring, holding, owning, possessing, or transferring any…
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The Directorate of Enforcement (ED) is the central agency responsible for investigating and enforcing violations of the Foreign Exchange Management Act (FEMA), 1999 in India. Functioning under the **Ministry of Finance**, it plays a crucial role in safeguarding the integrity of the foreign exchange market and ensuring compliance with India’s foreign exchange laws. Key Roles…
Understanding Contravention, Penalties, Adjudication and Appeals mechanism under FEMA
Under FEMA, contraventions, penalties, adjudication, and appeals are handled through a structured legal process to ensure fairness and regulatory compliance in foreign exchange dealings. Contravention Under FEMA A contravention occurs when any person, company, or entity violates the provisions, rules, regulations, or directions issued under FEMA, or acts against the conditions attached to any authorization…
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