This is a house Magazine of Gopast for circulation amongst its associates. Coping up skills by Mr R Gopinath, Financial Derivatives by Mr R Gopinath and Article on the need of a professional insurance advisor by Mr Ankur Shah; Proud to be associated with Ms Payal Dave and Mr Arjun Shameer the passionate designers and the gallery of events at Gopast.

1. Inscriptions 41
TRUTH STAYS FOREVER
APRIL 2023
10th
Anniversary
Issue
A MAGAZINE FROM THE GOPAST

2. Congratulating the patrons and the
team Gopast for the 10th
Anniversary issue of its house
magazine meant for its associates:
Inscriptions.

3. PAGE INDEX
Page CHAPTER Topic By
4 SCULPTOR SCULPTS
Coping up skills part 7
Reverse the bad choices
MR R.GOPINATH
14 GURUS SPEAK
Financial Derivatives
A brief Intro
MR R.GOPINATH
31 CATERPILLAR SPACE
Role and importance of a
professional insurance advisor
Part 2
Mr Ankur Shah
39 WE ARE PROUD OF
Ms Payal Dave & Mr Arjun
Shameer the passionate
designers. The founders of
the start-up “Madrasi Design
Studio”
42 GALLERY Events at Gopast

4. SCULPTOR INSCRIBES
R.GOPINATH

5. “Reverse the bad choices”.
Coping up Skill
“That one skill that makes humans Omnipotent”
Part 7
R.Gopinath
gopinathr@go-past.com
1) Life at times is easy-going. Everything seems to fall in right places. There
appears to be a certainty about the future. All ventures progress well.
2) At times life is tough. Everything seems to be out of place. Uncertainty about
future weighs like tons on our delicate shoulders. What makes it unbearable is
the multiplicity of the problems occurring at the same time. Situation is so
overwhelming that we feel that our capacity is too small to handle it. The more
we think about it, the more it scares us. There seems to be no light at the end
of the tunnel.
Most of us do not wish that the 2nd situation mentioned above happen to us.
But it does happen to most of us. Sometimes very frequently it happens. We
can not wish it away. We need to face it and get out of it quickly to pursue our
dreams.
4 Steps to be fully armed to diffuse such situations is called “RICH”
R: Reflecting; I: Identifying; C: Correcting and H: Habituating.
But before decoding the above acronym we need to look into something that is
core to our lives: “The freedom of making choices”.
Majority of us behave in almost the same manner in a given situation. But a few
of us behave differently. Most of the times we behave in the same manner in a
given situation, however some times we behave differently. The first set above
makes human behaviour predictable and therefore controllable. But the second

6. set makes us unpredictable and therefore uncontrollable. These differences in
the behaviour stems out from the power “Freedom to make choices”.
We make choices and we experience the consequences of the same.
Sometimes happily and at times with regret. Humans are endowed with the free
will. Even though many times it might appear as if there are no choices at all
other than the one which is visible right in the front, the fact remains that there
are as many choices available as much as the angles in a circle.
Other species do not have this freedom of choice or even if some have, it will
be at a very minimal level. Humans have this almost to an unlimited extent. In
every situation however grim or promising it may be, we still have the freedom
to choose our response. It is this power that makes us so special amongst all of
God’s creations. The question is are we using this power to make our lives
better or are we using this power to hurt ourselves (at times hurt the society)?
On what basis do we humans exercise these choices? Two factors that
influence the choice exercised:
1) Emotions or 2) Intelligences.
Human intelligence is beyond any units of measurements. We are so intelligent
as a species that we can understand the most complex things, invent most
sophisticated machines and solve puzzles posed by even Mother Nature. Given
this fact, all our choices must ideally be “Correct” Choices. In reality it is not
happening that way.

7. Intelligence points out to choose morning walks over lazily lying over soft bed
(covered by a warm blanket). To choose healthy food over deep fried finger
wafers (sprinkled with red chilly powder and salt to go with chilly sauce).
At a higher level, intelligence points to choose to act now over procrastinating a
critical activity. Intelligence points to choose to undertake risk mitigating
measures over chasing quick profits.
Our emotions dominate most of our choices. They overpower our reasoning
capacity. Sensible Logics fail before excitable emotions.
While, some of the gravely unhappy situations are created by destiny or the
forces of nature, most of the unhappy situations in life are self-created. We do it
so by misusing the power of the freedom to choose our responses.
Our intelligence that gives us the clarity of reasoning, using rationales,
understanding the logics, and the ability to predict using all the above works
little late in order of the sequence compared to the instincts and emotions that
act in the beginning. By the time the turn of intelligence come to play, the
choice has been exercised. The consequences of which we will have to endure
or enjoy.
For example a broken relationship due to words uttered in a gush of emotions.
A little calmer mind would have initiated the reasoning ability (empathy of the
other person’s situ) or even the historical data in our memory of many good
things the person would have done in the past. In this state of mind the
response chosen would have been words of understanding or words of apology
(if due), than harsh words that dented the relationship.
Why is the intelligence later in the order to respond than our instincts or
emotions. Humans are physically weaker than many other living beings
(animals). The in-built survival instinct triggers a micro-second response to
protect the self by fleeing, hiding, or even fighting. The limbic brain does this
function the seat of instinct and emotions This shares space with reptilian brain,
which takes care of heart rate, breathing and several involuntary functions
related to our body.

8. As the evolution continued, the Cerebral Cortex also called as the Neocortex
part of the brain developed and now that is the major portion of our brain. This
is the seat of intelligence, decision making, learning and the higher order skills.
The signals received from any stimulus reaches the limbic brain and then a
flurry of neuro activities get triggered rapidly interacting with reptilian brain. As
this flurry subsides a little bit then with the neocortex brain. All this happens
within micro of micro seconds.
Since the predominant objective is survival, the brain responds to the risk it
senses from the stimulus. (Stimulus: Anything that evokes a response; it can be
a picture, song, noise, words, object, person etc.) Look at the risk-meter picture.
If the signal is interpreted as unsafe then emotions (examples given in the
picture) gets generated.
If this is the case then the million dollar question is “Where is the freedom of
choice?” Everything seems to be pre-programmed.
From above picture it appears as the instant thought process of our brain is
triggered by instinct or emotions. Correct. But it can be directed, changed or
altered instantly if the higher order intelligence of the neocortex is allowed to
take charge. This Vetos the choice exercised and executes the appropriate
chosen response.

9. Between the stimulus and our response, there lies a space. In this space lies
the freedom of choice. It might many times appear as if there is no space at all,
as the response was instantaneous. Believe me there is a space. In this space
our mind decides to make a specific choice. There is enough space to get our
intelligence self to veto the choice selected by our emotional self.
Some people suffer more from a painful incident (Loss), than others who face
similar situation. Why does this happen? It is quite logical to assume that if the
extent of the loss is the same, its impact on the emotions of different people
should be the same. But in reality it is quite different.
Some people are pushed into a state of grief for years, while some get out of it
in few months. It is not just about the period of grief, it is also about the
intensity of the pain they undergo (feel). Some people cope up well with tough
situations, while some don’t.
These incidents can range from failing at an exam to loss of a beloved person.
From economic losses to loss of reputation. From physical harassment to
emotional black mail. From broken promises to betrayals. These incidents hurt
us. While we have less control over these events we have control over on how
we respond to these things.
We suffer more or recover soon based on our responses that we choose to.
Most of these times we respond automatically, because we have developed a
mental habit of responses. If this habit is hurting us, we need to change this
mental habit of choosing our responses.
At this point let us reconnect to the acronym we discussed at the beginning of
this article “RICH”.
R: Reflecting: Before you go to bed in the night spend a few minutes (20 to 30
minutes) reflecting on all that you did since you woke up that morning. Reflect
on the choices that you had exercised. Reflect on the way you responded to
stimuluses.
I: Identifying: While reflecting so please identify such responses or such choices
that need to be corrected. The way you responded to some stimuluses is
creating pain in you. Identify them.
Examples;

10. 1) An angry exchange of words for a delay in service at a hotel.
2) Worrying about the future prospects on hearing a bad news about the
industry.
3) Branding the self as a “failure” upon seeing negative results of an attempt
made.
4) Going blank at an interview
5) Justify a mistake vociferously (knowing that it was a mistake).
6) Procrastinated on a critical activity.
7) Avoiding counselling an employee to correct his behaviour, fearing his tough
reaction (likely).
8) Compromise made on value systems for a direly needed reward (financial
or otherwise)
9) Ruminating on a loss causing excessive worry
10) Vengefully inflicting pain on others.
The list goes on…
C: Correcting: Having identified the responses or the choices which need to be
corrected, now venture upon correcting them.
1) Calm your mind
2) See what other choices you had/you have than the one that you had
chosen. Use your intelligence, become conscious of the emotional self that
dominates the choice. ( For example: Love for a beloved one, blindfolding
his mistakes or the stress created by an anxiety to win the deal at any cost,
etc.)
3) Tell your mind, that these are better options available from the list of
choices
4) You can motivate your mind, by imagining the positive consequences of the
new choice. This will feed your emotional self with food for its satisfaction.
5) Self talk also activates your consciousness on this behaviour. For example a
sales man who is afraid or rejections and therefore is not able to make
marketing calls practices a self talk “To accept, reject or postpone
responding to my proposal is their choice, but to make an impressive
presentation is my choice. My choice does not depend on their choice.”
These are all self designed statements to alleviate the anxiety that precedes
a call. Like this we can design dialogues for the identified issues that need
to be corrected.

11. H: Habituating: Both mentally and in real life, practice and re-practice till this
replaces the old thinking habits. So that even your auto-responses are also the
appropriate ones.
While creating these mental habits, we need not be harsh on ourselves. We
need not hurry-up also. On an incremental basis we will find improvement taking
place. Slowly the auto-response triggered by the emotional self will subside
allowing the intelligent self to take charge. Note this word “Incremental” in this
statement. Even a small progress is a change from now. As we keep these
small changes happening by consistently following the “RICH” approach we
would have moved far ahead of our initial stage.
Bhagavad Gita:
In the dialogues between Him and Arjuna, Lord Krishna enumerates the
functions of the mind and sensory impulses. He also enumerates the quality of
the human intelligence and how it can be consciously used to take decisions.
He also explains the principles of Dharma. Having explained in detail everything.
Lord Krishna ultimately says, “Arjuna, it is upto you to decide upon how you
choose to act in this situation”

12. Bhagavad Gita 18.63:
Krishna, “Thus, I have explained to you this knowledge that is more secret than
all secrets. Ponder over it deeply, and then do as you wish”.
इित ते ज्ञानमाख्यातं गुह्याद्गुह्यतरं मया |
िवमृश्यैतदशेषेण यथेच्छिस तथा क
ु रु || 63||
The ultimate statement is Think it over and then choose your response.
The use of the higher order intelligences vested in humans giving him the
veto power over emotional impulsive behaviour has been stated in our
scriptures from time immemorial.
Bhagavad Gita:6.5: Use your mind to uplift you. Never use your mind to degrade
yourself. In that sense your mind can be your best friend also and it can be your
worst enemy also.
उद्धरेदात्मनात्मानं नात्मानमवसादयेत् |
आत्मैव ह्यात्मनो बन्धुरात्मैव िरपुरात्मन: || 5||
Between stimulus and our response there is a space and in that space lies our
freedom of choice.
If the choice that we had exercised to respond in a particular fashion is the
cause for our present miserable condition, then we must now correct it by
exercising different choices. Continuing to curse the self for the mistake then
made is not going to help. As long as we are alive we will have this space and
unlimited number of choices in that space. We must use the higher order
intelligences to test our chosen responses to the situations that we are facing
now, and if need be reverse the choice and exercise a different choice.
As Humans we enjoy autonomy of actions, but we must realise that we are
accountable for the same. The consequences of our actions will follow us
wherever we go. We have choices on our deeds, but not on its consequences.
The understanding that we have the freedom to choose gives us the power to
elevate us over the suffering that we undergo while facing difficult situations.

13. This awareness puts us in the driver seat. We need not be driven around by the
current of the situations like withered leaves floating in river water.
We can choose and we can choose to reverse the choices also.

14. GURUS SPEAK
R.GOPINATH

15. “Financial Derivatives: A Brief Intro:”
R.Gopinath
gopinathr@go-past.com
A derivative means something which is derived. Meaning that
the value or the price is derived from any underlying asset.
There is no independent value of derivatives and its value
depends on the underlying asset. The price of derivatives is
based on the price of underlying asset, like value (rate) of the
rent is based on the property’s value.
From ancient times derivatives originated as a tool for
managing risk in commodities markets. Initially derivatives were
developed to hedge the price risk in case of agricultural
commodities. For example a paddy farmer sells his produce,
even while he is cultivating it, to a merchant at a price, to be
delivered (rice) at a later date.
Financial derivatives were born later-on.
Derivatives can be classified into Commodity derivatives and
Financial derivatives on the basis of the type of underlying
asset.

16. For the Commodity derivatives the underlying asset is a
physical or real asset such as wheat, rice, jute, pulses, onions
or even metals such as gold, silver, copper, aluminium, oil etc.
For the Financial derivatives the underlying asset is a financial
asset such as equity shares, bonds, debentures, interest rate,
stock index, current, foreign exchange rate etc. Financial
derivatives are now transacted more across various
geographies in this world.
Commodity derivatives are traded on:
• Multi Commodity Exchange (MCX)
• National Commodities and Derivatives Exchange and
(NCDEX) in India.
Financial derivatives are traded on:
• BSE,
• NSE,
• United stock exchange (USE) and
• MCX-SX in India.
Definition of Financial Derivatives
Section 2(ac) of Securities Contract Regulation Act (SCRA) 1956
defines Derivative as:
a) “a security derived from a debt instrument, share, loan
whether secured or unsecured, risk instrument or
contract for differences or any other form of security;

17. b) “a contract which derives its value from the prices, or index
of prices, of underlying securities”.
Financial derivatives include :
• Futures,
• Forwards,
• Options,
• Swaps and can be even a
• Combination of cash market instruments or other financial
derivative instruments.
Futures contracts were in existence long before formal
derivatives markets got functional.
Evolution Of Financial Derivative
In the early parts of 1970s Brettonwood System failed and the
fixed exchange rate regime broke down. This provided the
impetus for financial derivatives to become a major force, in
financial markets. A new exchange rate regime known as the
Floating rate (flexible) system based upon the market forces of
the demand and supply gap on different currencies came into
existence. This posed a new risk to business firms, known as
currency or foreign exchange risk. This necessitated new
financial instruments to overcome this risk in the new financial
environment.
Another major consideration the markets had to reckon was
the fluctuation in the short-term interests. This fluctuation

18. created instability not only in short term rates, but it also
affected long term rates and also the values of the bonds.
This created another risk, known as interest rate risk, for both
the issuers and the investors of debt instruments.
Interest rate fluctuations had not only created instability in bond
prices, but also in other long-term assets such as, company
stocks and shares.
Share prices are determined on the basis of expected present
values of future dividend payments discounted at the
appropriate discount rate.
Discount rates are usually based on long-term interest rates in
the market. So, increased instability in the long-term interest
rates caused enhanced fluctuations in the share prices in the
stock markets.
The recent socio-economic conditions in USA and the upward
movement of interest rates to tame inflation and its effect on
the bond prices exposed the capital inadequacy for financial
institutions. This also triggered a run on the Silicon Valley Bank.
The first financial futures market is the International Monetary
Market, was established in 1972 by the Chicago Mercantile
Exchange which was followed by the London International
Financial Futures Exchange in 1982.

19. In India, forward/future contracts in commodities are regulated
by, Forwards Contracts (Regulation) Act, 1952, which
established a Forward Markets Commission (FMC) to have
jurisdiction over commodity forward/futures contracts.
The derivative trading was introduced in 2001 in India, under
the Securities Contracts (Regulation) Act, 1956 (SCRA).
Consequently, regulation of derivatives came under the preview
of Securities Exchange Board of India (SEBI).
The National Stock Exchange of India Limited (NSE)
commenced trading in derivatives with the launch of index
futures on June 12, 2000. The futures contracts are based on
the popular benchmark Nifty 50 Index.
The Exchange introduced trading in Index Options (also based
on Nifty 50) on June 4, 2001. NSE also became the first
exchange to launch trading in options on individual securities
from July 2, 2001. Futures on individual securities were
introduced on November 9, 2001. Futures and Options on
individual securities are available on securities that meet the
eligibility criteria stipulated by SEBI. The Exchange has also
introduced trading in Futures and Options contracts based on
Indices. Currently, Derivatives on NIFTY 50, NIFTY Bank, NIFTY
Financial Service and NIFTY Midcap Select are available for
trading.
Uses of Financial Derivative
There are four major uses of Financial Derivatives:

20. 1. Discovery of price: As the financial derivative instruments
are contract for future. So there is a necessity to estimate
the price. Gathering lots of data, information by
continuously watching markets and financial assets is
required for this work. This information will give us an idea
about the present prices as to they are over-priced or
under valued. Derivatives works as barometers to predict
the price of future share market as well as spot market.
Because of the study and the estimation tools available in
the modern era they assess information to discover true
values and prices of assets in the markets.
2. Risk transfer: The derivatives market helps to transfer
risks from those who have them but may not like them to
those who have an appetite for them. The derivatives
assist the investors, traders and managers of large pools
of funds to devise such strategies so that they may make
proper asset allocation increase their yields and achieve
other investment goals.
There are various traders in financial derivative market like:
• hedgers,
• speculators and
• arbitragers.
3. Regulated speculation: Financial derivatives are exchange
traded contracts which traded in a controlled environment.
Due to that it transfers the speculation in a regulated
market. A regulated and controlled security market helps in
managing, monitoring, and surveillance of the trading
activities of speculators,
4. Increases retail savings and investments: A financial
derivative helps in creating a security market that is more

21. efficient and provides liquidity to the market, which
encourage investors to make investment in share market.
The transfer of risk enables market participants to expand
their volume of activity. Derivatives provide enormous
amount of leverage. It is possible to take large derivative
position with relatively small initial investment. Derivatives
are based on margin trading system where only certain
percentage of total amount of contract is required to pay
as margin.
Types Of Financial Derivative
There are various types of financial derivatives which are
available in the security market for trading as per the need of
investor.
The most commonly used derivatives contracts are:
1) Forwards, 2) Futures and 3) Options.
1) Forward Contracts:
A forward contract is a customized contract between two
parties, where one party agrees to sell and
another party agrees to purchase a specific assets, at a
specified price and for a specified period of time and the
settlement takes place in future on a specific date in the future
at today’s pre-agreed price. These contracts are
traded through over-the-counter market and are mostly non-
standardized contracts.

22. Suppose a farmer produces rice and he expects to have an
excellent yield on rice; but he is worried about the future price
fall of that commodity. How can he protect himself from falling
price of rice in future? He
may enter into a contract on today with some party who wants
to buy rice at a specified future date on a price
determined today itself. In the whole process the farmer will
deliver rice to the party and receive the agreed
price and the other party will take delivery of rice and pay to
the farmer. In this illustration, there is no exchange of money
on that day and the contract is binding on both the parties.
2) Futures Contracts:
But if the same is done on a regulated exchange then it
becomes a Future contract. So future contracts are forward
contracts traded only on organised exchanges and are in
standardised contract-size.
The farmer has protected himself against the risk by selling rice
futures and this action is called short hedge while on the other
hand, the other party also protects against-risk by buying rice
futures is called long hedge.
3) Option Contracts:
As the name indicates option means the buyer have the option
to execute the contract or not to execute
the contract but seller has no such option, and they have to
execute the contract.

23. This is also a specified contract between two parties for a
specified period at a specified price and for a specified period.
Versatility is the main importance of option contracts.
Option is a financial instrument with the advantage of only
upside without downside, as the maximum loss is only up to
the premium amount on the situations
1) of out of the money and
2) at-the money options.
Out of the money is a condition when strike price is more than
current price in case of call option and reverse in put option.
There are various strategies which help in gaining the
popularity of option contract. All the option strategies help in
controlling the overall portfolio risk.
Hedging and speculation are important tools to control over
price fluctuation. Hedging is a tool to control losses by taking
simultaneously opposite positions. A holding position normally
to protect against the loss of falling market and one can take
put option or short call option, which helps in controlling the
future risk on market rising.
By availing financial derivative instruments like Index Futures &
Options, Stock Futures & Options etc., investors can reduce the
risk of uncertainty. These instruments help investors in creating
a portfolio of assets to match various likely scenarios in the
Markets.

24. The following table gives highlights of the differences between
Forwards contracts and Futures contracts:
Different Types of Futures Contracts
Depending on the underlying asset, there are different types of futures contracts
available for trading.
1. Individual stock futures:
BASIS FORWARDS FUTURES
Standardisation of
contract
Forward contracts are private agreements
between two parties and are non-standardised.
Futures contracts are exchange traded
and standardised contracts as terms and
conditions are set in advance.
Trading & Regulation Forwards are not traded on stock exchange.
They are not regulated.
Futures are traded on stock exchange and
are regulated.
Counter party default risk There is always a possibility that a party may
default.
Clearing houses guarantee the
transaction, thus minimising the default
risk.
Liquidity Liquidity is low, as contracts are tailor-made
contracts catering to the needs of parties
involved. Further, they are not easily accessible
to other market participants.
Liquidity is high, as contracts are
standardised exchange-traded contracts.
Price Discovery Price discovery is not efficient, as markets are
scattered.
Price discovery is efficient, as markets are
centralised.
Settlement Settlement of the Forward contract occurs at the
end of the contract, i.e. Settlement date only.
Futures contracts are mar-ked-to market
on daily basis which means that they are
settled day by day until the end of the
contract.
Hedging/speculation Forward contracts are popular among hedgers. Futures are popular among speculators.
Margin Requirements There is no requirement for depositing margin
money by either party.
Both the buyer and seller have to deposit
margin money with the exchange.
Examples Foreign Currency market in India Commodities futures, Index futures and
Individual Stock futures in India.

25. These are contracts between 2 investors. The buyer promises to pay a specified
price for, say, 500 shares of a single stock at a predetermined future point. The
seller promises to deliver the stock at a specified price on a specified future
date.
2. Stock index futures
The underlying asset is the stock index. Stock index futures are more useful
when one is speculating on the general direction of the market rather than the
direction of an individual stock. It can be used to hedge a portfolio of shares.
3. Commodity futures
Here the underlying asset is a commodity like gold, silver, nickel, crude oil, etc.
4. Currency futures
These are exchange-traded futures contracts that specify the price in one
currency at which another currency can be bought or sold at a future date.
These are legally binding, and the parties that hold the contracts on the expiry
date must deliver the currency amount on the specified date at the specified
price.
5. Interest rate futures
The underlying asset, in this case, is the debt obligation which moves according
to the changes in the interest rates.
Types of Margins
There are basically three types of margins in derivative trading. These are the
Initial margin, Maintenance margin, and Variation margin-
1. Initial margin
It is the initial cash that you must deposit in your account before you start
trading. This is required to ensure that the parties honour their obligation and
provides a cushion to the losses in the trade. In simple words, it is like the down
payment for the delivery of the contract.

26. 2. Maintenance Margin
It is a cash balance that a trader must bring to maintain the account, as it may
change due to price fluctuations. The maintenance margin is a certain portion of
the initial margin for a position.
If the margin balance in the account goes below such margin, the trader is
asked to deposit the required funds or collateral to bring it back to the initial
margin requirement. This is known as a margin call.
3. Variation Margin
As soon as the margin falls below the maintenance margin, you need to deposit
cash or collateral to bring the account back to the initial margin.
The following table gives highlights of the differences between
Futures contracts and Options:
BASIS FUTURES OPTIONS
Rights Both the parties have right to ask for the
performance of the contract.
Only the buyer (or holder) of the options has the
right to buy or sell. Seller does not have any right.
Obligations Both the parties are obliged to perform the
contract.
Only the seller is obliged to perform the contract.
Premium
payment
No premium is paid by either party. The buyer pays the options premium to seller.
Margin
requirement
Both the parties have to deposit some initial
margin as per the requirements of the exchange.
Only the option writer has to deposit initial margin
with the exchange as only the seller is exposed to
price risk. No margin is to be deposited by the
option holder, as he has a right but no obligation.
Profit and loss
potential
The buyer as well as the seller of the futures
contract are exposed to all the downside risk and
has potential for all upside profits. The gain to the
buyer is loss to the seller and the loss to the
buyer is gain to the seller. There is unlimited gain
and loss possibility for both the parties.
The option holder’s loss is limited (to the extent of
premium paid), but has potential for all upside
profits. The seller’s gain is limited to the amount
of options premium but he is exposed to all the
downside risk (i.e. potential loss is unlimited).
Realisation of
profits/losses
Profit or loss on futures are ‘marked to market’
daily, meaning the change in the value of the
positions is attributed to the accounts of the
parties at the end of every trading day – but a
futures holder can realize profits/losses by going
to the market and taking the opposite position.
The gain on option can be realized in the
following ways:
a. Exercising the option at expiry
b. Going to the market and taking the opposite
position, or
c. Waiting until expiry and collecting the
difference between the asset price and the strike
Execution of
contract
Futures contract are settled through cash or
delivery but they are always executed.
Buyer may or may not exercise the option and
therefore the option contract may lapse without
being exercised or become a waste.

27. Portfolio managers are instrumental in gaining maximum
benefits for the investors. A bad portfolio manager can gain a
lot in his self interest but can cause harm to the investor.
As per the ISDA research, ISDA Derivatives Usage Survey,
reports that 94% of the world’s largest business houses use
currency derivatives and interest rate derivatives to manage
macroeconomic risks.
Most of the financial institutions are using financial derivative as
a risk management tool for their customers. This does not
mean that derivative instruments are free from risks. Derivative
contracts also involve certain types of risk like market risk,
operational risk, credit risk, liquidity risk, and legal risk etc.
The using of derivative instruments can be good luck for those
who executed it properly due to the liquidity and relatively
lower cost factors, but bad luck for those who are unaware
and have not executed the strategy properly.
WHAT SHOULD WE ADVICE OUR CLIENTS?
The question that comes to the mind of the financial advisors
after reading this article is:
Purpose Futures are used to hedge and speculate. Usually used as a hedge instrument. Options are
a better hedging instrument than futures. This is
because here the hedger keeps all the potential
for upside gain but his loss is limited.

28. Now that I have a fairly good idea about these assets should I
advice my clients to invest in these instruments? Should this be
a part of his portfolio?
To find answers to your question, please continue to read the
final part of this article:
You would have observed from the Financial Pyramid that
these types of assets are contained at the top of the Pyramid.
Even though these instruments were created to serve a basic
purpose of Risk mitigation, because of the unmindful leveraged
positions the participants are availing to gain huge and quick
profits, nowadays, these have become potential loss makers
for the investors.
Warren Buffet considered as the “Messiah of investment world”
In Berkshire Hathaway’s 2002 annual report, said that
derivatives are “weapons of mass-destruction”. The annual
report had an entire section dedicated to derivatives.

29. Peter Lynch, once stated that options and futures on stocks
should be outlawed. These concerns were vindicated by the
hundreds of billions of dollars of derivatives-related losses
suffered by financial institutions during 2007 and 2008, which
contributed to the severe economic downturn.
By contrast, former Fed chairman Alan Greenspan opined in a
speech delivered before the Futures Industry Association in
1999 that derivatives “unbundle” risks by carefully measuring
and allocating them “to those investors most able and willing to
take it,” a phenomenon that has contributed to a more efficient
allocation of capital.
SEBI’s risk disclosure document Annexture 5 reads as under:
Stock exchanges/SEBI does neither singly or jointly and expressly nor
impliedly guarantee nor make any representation concerning the
completeness, the adequacy or accuracy of this disclosure document nor
have Stock exchanges /SEBI endorsed or passed any merits of
participating in the trading segments. This brief statement does not
disclose all the risks and other significant aspects of trading.
In the light of the risks involved, you should undertake transactions only if
you understand the nature of the relationship into which you are entering
and the extent of your exposure to risk.
You must know and appreciate that trading in Equity shares, derivatives
contracts or other instruments traded on the Stock Exchange, which have
varying element of risk, is generally not an appropriate avenue for
someone of limited resources/limited investment and/or trading experience
and low risk tolerance. You should therefore carefully consider whether
such trading is suitable for you in the light of your financial condition. In
case you trade on Stock exchanges and suffer adverse consequences or
loss, you shall be solely responsible for the same and Stock exchanges/its
Clearing Corporation and/or SEBI shall not be responsible, in any manner
whatsoever, for the same and it will not be open for you to take a plea that
no adequate disclosure regarding the risks involved was made or that you

30. were not explained the full risk involved by the concerned stock broker.
The constituent shall be solely responsible for the consequences and no
contract can be rescinded on that account. You must acknowledge and
accept that there can be no guarantee of profits or no exception from
losses while executing orders for purchase and/or sale of a derivative
contract being traded on Stock
The whole document specifies types of risk. Please read the document
from this link: https://www.sebi.gov.in/sebi_data/commondocs/
ann5risk_p.pdf
I have always be telling in my classes that “Purpose decides the
choice” So find out the purpose of the investment that your client
wants to achieve. Draw a complete map of life. See if the not
negotiable goals are adequately provided for at least for the minimum
level requirements, and then after properly explaining the risk-return
trade off in these speculative instruments you may advice him to either
invest or desist from investing.

31. CATERPILLAR SPACE
Mr Ankur Shah

32. ROLE & IMPORTANCE OF A PROFESSIONAL INSURANCE ADVISOR PART 2
Life insurance is a very important contract. When there is a sufficient cover provided for the
family in case of unfortunate death of a family member a life insurance policy becomes a life
saver for the remaining family members for their remaining life time. When a sum of money or
series of income or combination of both is received from a properly & professionally guided
insurance policy it takes care of a family’s all the future working capital need & once a while
nonnegotiable major expenses plus debt if any. Role & knowledge of a professional insurance
advisor is not only important in analyzing client needs and suggesting a proper insurance policy
or a combination of policies in a complex world of life insurance products but also in filling up the
proposal form. The questions are so technical, they also require a help of an experienced
professional advisor. If the answers of proposal form are not properly given it may result in
rejection of a death claim up on which your family’s entire future depends.
I will explain the role & importance of a professional advisor in 2 stages.
1. Need analysis for the recommendation of right product and in a proper quantified
manner.
2. Technical things involved in processing of insurance proposal form
We discussed PART 1 Need analysis for the recommendation of right product and in a
proper quantified manner in previous issue. Now let’s discuss Part 2 in this issue.
2. TECHNICAL THINGS YOU/ Your advisor MUST KNOW WHILE PURCHASING LIFE INSURANCE
As shown in above figure Indian
contract act 1872 applies to life insurance
as well.
Offer & Acceptance: A proposer
offers his risk cover in the form a
proposal form to life insurer & life insurer
either accepts it at ordinary rates or
rejects it. Or in some cases makes a
counter offer to accept it with extra
premium, a lien, a reduced term, a
reduced Sum Assured or for an insurance
plan other than asked by proposer. In this
case a counter offer is made to proposer
and he needs to either accept it or reject
it.

33. Consideration: Consideration for the proposer is risk cover & he pays premium for the
risk cover provided by life insurer. Consideration for the insurer is premium for which he provides
risk cover to the proposer.
Rest three are self-explanatory so I will not go in to their details. Now apart from these 6
valid essentials 3 more principles also apply to insurance. Let’s have a look at them.
Insurable Interest: A proposer can
not take a life insurance policy on just
anyone’s life. You can buy life insurance
only & up to economic loss on someone’s
death. There must be sufficient insurable
interest for purchasing a life insurance
policy. There is no particular definition of
insurable interest, it varies case to case.
Let’s look at some of the examples.
1. Husband and wife have unlimited
insurable interest in each other’s life.
2. Creditor has insurable interest in
debtor’s life up to the amount of debt.
3. An employer has insurable interest in
to its key man’s life.
In life insurance insurable interest is applied at the time of buying insurance while in
general insurance insurable interest is applied both at the time of buying insurance and at the
time of claim also.
Utmost Good Faith: The principle demands that proposer should disclose every material
fact correctly whether asked or not asked that affects underwriter’s decision to accept or reject
or provide insurance then terms other then asked for. An insurer put’s utmost good faith in to
the proposer’s disclosers. If anything in the proposal form is found wrong or any material
information is withheld and the same is proved by insurer the contract may be cancelled and may
result in repudiation of death claim. Proposer’s duty of utmost good faith does not end on just
submitting proposal form but by the time the proposal is processed and until FPR (first premium
receipt) is received it is proposer’s duty to bring in to notice to the insurer of any changes in
health, occupation or any other material fact. Once the FPR is issued there is no need to disclose
any changes that may happen after it.
When a lapse policy is being revived it is as good as buying new insurance and at the time
of revival again proposer need to follow principle of utmost good faith.

34. Principle of indemnity: The principle of indemnity states that an insurance policy shall
not provide compensation to the policyholder that exceeds their economic loss. This limits the
benefit to an amount that is sufficient to restore the policyholder to the same financial state they
were in prior to the loss. In other words, the principle of indemnity ensures that the insured gets
made whole from their loss but will not benefit, gain, or profit from an accident or claim. Nor will
you get less than what is necessary to restore you to the same financial position. It is only applied
to general insurance and not to the life insurance.
Preamble of a life insurance policy bond. Basically, there are three parts in the preamble.
Part 1 makes proposal form basis and part of the contract. Part 2 provides operative clause. And
part 3 is proviso (makes terms and conditions printed on policy bond part of the contract).
Above is a typical sample of a preamble printed on a stamp duty paid bond which makes
proposal form basis and part of the contract. Now you must have understood the importance of
role of a professional advisor in filling up the proposal form.
Even the completion of application forms, especially those for insurance and pension
products, calls for the adviser’s professional knowledge. For example:
• health questions may be difficult for the general public to interpret;
• pension questions may require technical understanding; and
• questions on occupation and leisure activities may require supplementary information not
indicated on the questionnaire.

35. There may be places on the application form where untruthful answers appear to be more
helpful to the success of the client’s application than the truth. For example, the client may not
wish to disclose that they are overweight or have an unhealthy lifestyle (e.g. a heavy smoker).
Good practice demands that the adviser insists on truthful answers and points out the legal
implications of misrepresentation and non-disclosure.
The adviser’s responsibility does not end when all the applications are completed, signed
and ready for submission to product provider(s). Further tasks might include:
• explaining to the client the administrative processes the application will go through and
the timescales involved;
• telling the client about the documents they will receive and how to respond to them;
• preparing the client for the fact that medical reports or examinations may be required;
• arranging required medicals and seeing that the client attends; and
• ensuring that enquiries from product providers are answered quickly and that all
necessary actions are taken to ensure that technical processing can be completed efficiently.
By this time, you must have understood the role & importance of a professional financial
advisor. Now let’s look at the dome of the data from IRDAI’s (Insurance Regulatory and
development authority) last annual report.

36. The figure here shows
Channel wise new business
underwritten by life insurers.
From the figure it is clear that in
LIC 93.87% of total business is
underwritten by individual
agents and only 23% business is
underwritten by individual
agents in private sector. In LIC
only 3% business is underwritten
by banks and in private insurers
54.55% business in underwritten
by banks. Source last published
IRDA annual report.
The above figure shows share of Unfair Business Practices complains received as a
percentage to the total complaints. LIC where almost 94% business in underwritten through
agents show 3.57% complaints related to UFBP. In private sector where almost 54% business in
underwritten through banks show 74.14% of total complaints related to UFBP. Source last
published IRDA annual report.

37. Channel-wise Mis-Selling
Complaints. Source last
published IRDA annual
report.
Above figure shows penetration of insurance in India. It is measured in 2 ways. As a percentage
of premium to GDP & as a ratio of insurance premium to population (Insurance Density). If you look at the
figures in both the terms insurance penetration is very low in India. Source last published IRDA annual
report.

38. As per above figure in India protection gap stood 83%. Means people were insured only
to the tune of 17% of required cover. Source Swiss Re, Sigma No. 04/2022.
Looking at all the above factors, low penetration of insurance in India, Largest protection gap in
life insurance, India needs physical presence of well trained, experienced and professional advisors.
Physical presence of a professional advisor has a very big role to pay for the families to ensure every family
is financially secured in the absence of earning member. For the country by making penetration as
percentage of GDP in double digit and contribute in India becoming largest economy in the world.
Ankur Shah

39. Inscriptions is
40 issues old
April 2013 to January 2023

40. Ms Payal Dave and Mr Arjun Shameer the Passionate designers.

41. A few words about Madrasi Design Studios. The studio is a start up interior
designing firm, specializing in residential interior projects. The founders are Er.
Arjun Shameer, B. Tech Civil Engg and Ar. Payal Y Dave, B. Arch, a great
combo of a civil engineering and architecture. Ms Payal Dave is the daughter
of SBA MR Yogesh Dave from LIC Of India.
As a result of their hard work, they have been bestowed with the award
“MOST PROMISING & CREATIVE INTERIOR DESIGN FIRM
OF THE YEAR 2023
TAMIL NADU”
and the founders were awarded with
“TOP 25 MOST RISING INTERIOR DESIGNER 2023, INDIA”
at the
ARCHITECTURE AND INTERIOR DESIGN EXCELLENCE AWARDS
AND CONFERENCE
conducted by
BEGIN UP RESEARCH INTELLIGENCE PRIVATE LIMITED,
at the Taj West End, Bengaluru, India.
We at Inscriptions are proud to be associated with Ms Payal Dave and Mr Arjun
Shameer the young awardees. We wish them many more laurels in their
business that they are passionate about.

42. NEWS AND GALLERY
EVENTS AT GOPAST

43. The “Legends” the 10 month course ended on 17th Feb 2023.
The group picture of the dynamic participants at Gopast Centre
Chennai

44. Mission MDRT Batch at Vellore organised by VIA

45. Gopast is committed to keep expanding its infrastructure to
provide our participants with a great learning experience. As a
part of this endeavour Gopast inaugurated two dormitory type
rooms separately for women and men providing lodging facility
of our participants who come from distant places to participate
in our sessions at Chennai. This facility is well equipped with
Bunk beds, attached Bathrooms and Cloak stores

46. Leading from the Front -Level 3
a six months course for Dev Officers/SBAs of LIC
at Thane the group picture of the dynamic
participants at the conclusion of the course.