SlideShare a Scribd company logo
1 of 2
Investment Management

What is investment?

Investment is the action taken by an individuals or corporate bodies to add value to already
controlled asset or resources. This implies that you must not be the owner of whatever resource
you invest as your investment.

There are so many forms of investment. For example Shares investment, real estate investment,
insurance investment, business, bonds etc. Please note that your living home is not an
investment, as a lot of people still consider their living home as investment but your home does
not bring in any cash flow expect it is sold and until that happens; it still remains a liability and
not an asset.

In general terms we can say that, investment means the use money in the hope of making more
money.

In finance, investment means the purchase of a financial product or other item of value with an
expectation of favorable future returns. In business, investment means the purchase by a
producer of a physical good, such as durable equipment or inventory, in the hope of improving
future business. In an economic sense, an investment is the purchase of goods that are not
consumed today but are used in the future to create health.

Investment has a connotation of a long term holding period, in contrast to speculation, which is
the purchase of assets seeking profit from short-term price movement. Speculation has come to
mean different things to different people, yet still retain something of its original meaning:
namely, to reflect or theorize without a factual basis.

As per Keynes, “the activity if forecasting the prospective yield of assets over their whole life,”
in contrast to speculation, which means “the activity if forecasting the psychology in the
market.”

Speculator is somebody who buys something only because they think someone else will pay
more for it in the near future, as opposed to an investor, who buys it because analysis confirms
that the investment is of high quality and good value, so it is worth holding.

A speculator buys things because they expect a less informed person will buy it off them later at
a higher price, whereas an investor because they promise both a return on capital invested, as
well as a return of capital invested.
Unit 5 Derivatives and their Valuation:

Options

Derivative securities play a large and increasingly important role in financial markets. These are
securities whose prices are determined by the prices of other securities. These assets are also
called contingent (conditional) claims because their payoffs are contingent on the prices of other
securities.

Options and future contracts are both derivative securities. Swaps also are called derivatives
because the value of derivatives depends on the value of other securities; they can be powerful
tools for both hedging and speculation.

How does it start? (Options)

Trading of standardized options contracts on a national exchange started in 1973 when Chicago
Board Options Exchange (CBOE) began listing call options. These contracts were almost
immediately got a great success. Options contracts are traded now on several exchanges like The
National Stock Exchange Limited in India (NSE), has introduced trading in S & P CNX Nifty
options from June 4, 2001 and The Mumbai Stock Exchange (BSE) also started trading on
options on Sensex from June 4, 2001.

They are known as common stock, stock indexes, foreign exchange, agricultural commodities,
precious metals, and interest rate futures.

The Options Contract

There are two types of options.

   1. A call option

   2. A put option

A call option gives its holder the right to purchase an asset for a specified price, called the
exercise or strike price on or before some specified expiration date. For example, a March 2011
call option on Bajaj Auto with exercise price of Rs. 1080 that means its owner have right to
purchase Bajaj Auto stock for a price of Rs. 1080 at any time up to and including the expiration
date in March 2011. The holder of the call is not required to exercise the option.

More Related Content

What's hot (20)

Financial assets(s)
Financial assets(s)Financial assets(s)
Financial assets(s)
 
What is a mutual fund
What is a mutual fundWhat is a mutual fund
What is a mutual fund
 
money market
money marketmoney market
money market
 
Government securities
Government securitiesGovernment securities
Government securities
 
Primary and Secondary Markets
Primary and Secondary MarketsPrimary and Secondary Markets
Primary and Secondary Markets
 
Money market instruments
Money market instrumentsMoney market instruments
Money market instruments
 
Financial market
Financial marketFinancial market
Financial market
 
Investment alternatives
Investment alternativesInvestment alternatives
Investment alternatives
 
G-Sec Market
G-Sec MarketG-Sec Market
G-Sec Market
 
Money market Instruments
Money market InstrumentsMoney market Instruments
Money market Instruments
 
bonds and valuation
bonds and valuationbonds and valuation
bonds and valuation
 
COMMERCIAL PAPERS
COMMERCIAL PAPERSCOMMERCIAL PAPERS
COMMERCIAL PAPERS
 
Rules of classification provision rescheduling_write-off
Rules of classification provision rescheduling_write-offRules of classification provision rescheduling_write-off
Rules of classification provision rescheduling_write-off
 
TB
TBTB
TB
 
Money market
Money marketMoney market
Money market
 
Money market in italy
Money market in italyMoney market in italy
Money market in italy
 
Money market
Money marketMoney market
Money market
 
Money Markets
Money MarketsMoney Markets
Money Markets
 
Derivative market in india
Derivative market in indiaDerivative market in india
Derivative market in india
 
Money market
Money marketMoney market
Money market
 

Viewers also liked

Coiason29july08 2
Coiason29july08 2Coiason29july08 2
Coiason29july08 2Sarath Nair
 
Dharati skills of leadership
Dharati skills of leadershipDharati skills of leadership
Dharati skills of leadershipSarath Nair
 
New rich text document
New rich text documentNew rich text document
New rich text documentSarath Nair
 
032459237 x 168230
032459237 x 168230032459237 x 168230
032459237 x 168230Sarath Nair
 
Essential component of leadership
Essential component of leadershipEssential component of leadership
Essential component of leadershipSarath Nair
 

Viewers also liked (8)

Taxation
TaxationTaxation
Taxation
 
Coiason29july08 2
Coiason29july08 2Coiason29july08 2
Coiason29july08 2
 
Ch10 final
Ch10 finalCh10 final
Ch10 final
 
Dharati skills of leadership
Dharati skills of leadershipDharati skills of leadership
Dharati skills of leadership
 
New rich text document
New rich text documentNew rich text document
New rich text document
 
032459237 x 168230
032459237 x 168230032459237 x 168230
032459237 x 168230
 
Ch2
Ch2Ch2
Ch2
 
Essential component of leadership
Essential component of leadershipEssential component of leadership
Essential component of leadership
 

Similar to Investment management 97 zankhana

Investment analysis and portfolio management
Investment analysis and portfolio managementInvestment analysis and portfolio management
Investment analysis and portfolio managementAkshay Kumar
 
Investment process
Investment processInvestment process
Investment processAmit Dwivedi
 
How to Start Investing Guide For Beginners
How to Start Investing  Guide For BeginnersHow to Start Investing  Guide For Beginners
How to Start Investing Guide For BeginnersNikit Shingari
 
Chapter 8- Introduction to Investment.pptx
Chapter 8- Introduction to Investment.pptxChapter 8- Introduction to Investment.pptx
Chapter 8- Introduction to Investment.pptxAilynSBulatao
 
KNOWLEDGE OF SECURITY MARKET
KNOWLEDGE OF SECURITY MARKETKNOWLEDGE OF SECURITY MARKET
KNOWLEDGE OF SECURITY MARKETSumit Bharti
 
Investing Explained.docx
Investing Explained.docxInvesting Explained.docx
Investing Explained.docxnarendhran968
 
Invt Chapter 1 ppt.pptx best presentation
Invt Chapter 1 ppt.pptx best presentationInvt Chapter 1 ppt.pptx best presentation
Invt Chapter 1 ppt.pptx best presentationKalkaye
 
A summer training project report presentation on
A summer training project report presentation onA summer training project report presentation on
A summer training project report presentation ondimpishah1989
 
Saving, Investment, Participation
Saving, Investment, ParticipationSaving, Investment, Participation
Saving, Investment, Participationshaharyar ahmed
 
Introduction to Finance - IIT Guwahati
Introduction to Finance - IIT Guwahati Introduction to Finance - IIT Guwahati
Introduction to Finance - IIT Guwahati Sasank Gurajapu
 
Learning derivative1 microsec_280612
Learning derivative1 microsec_280612Learning derivative1 microsec_280612
Learning derivative1 microsec_280612Sachin Shintre
 
Investment management
Investment managementInvestment management
Investment managementRajThakuri
 
Financial Instruments.pptx
Financial Instruments.pptxFinancial Instruments.pptx
Financial Instruments.pptxManjuJhuriani1
 

Similar to Investment management 97 zankhana (20)

Types of investment
Types of investmentTypes of investment
Types of investment
 
Investment analysis and portfolio management
Investment analysis and portfolio managementInvestment analysis and portfolio management
Investment analysis and portfolio management
 
Investment Basics.pptx
Investment Basics.pptxInvestment Basics.pptx
Investment Basics.pptx
 
Investment process
Investment processInvestment process
Investment process
 
How to Start Investing Guide For Beginners
How to Start Investing  Guide For BeginnersHow to Start Investing  Guide For Beginners
How to Start Investing Guide For Beginners
 
Chapter 8- Introduction to Investment.pptx
Chapter 8- Introduction to Investment.pptxChapter 8- Introduction to Investment.pptx
Chapter 8- Introduction to Investment.pptx
 
Stock market
Stock marketStock market
Stock market
 
KNOWLEDGE OF SECURITY MARKET
KNOWLEDGE OF SECURITY MARKETKNOWLEDGE OF SECURITY MARKET
KNOWLEDGE OF SECURITY MARKET
 
investment analysis and portfolio management
investment analysis and portfolio management investment analysis and portfolio management
investment analysis and portfolio management
 
Investing Explained.docx
Investing Explained.docxInvesting Explained.docx
Investing Explained.docx
 
Invt Chapter 1 ppt.pptx best presentation
Invt Chapter 1 ppt.pptx best presentationInvt Chapter 1 ppt.pptx best presentation
Invt Chapter 1 ppt.pptx best presentation
 
A summer training project report presentation on
A summer training project report presentation onA summer training project report presentation on
A summer training project report presentation on
 
Saving, Investment, Participation
Saving, Investment, ParticipationSaving, Investment, Participation
Saving, Investment, Participation
 
Introduction to Finance - IIT Guwahati
Introduction to Finance - IIT Guwahati Introduction to Finance - IIT Guwahati
Introduction to Finance - IIT Guwahati
 
Learning derivative1 microsec_280612
Learning derivative1 microsec_280612Learning derivative1 microsec_280612
Learning derivative1 microsec_280612
 
Investing
InvestingInvesting
Investing
 
Investment management
Investment managementInvestment management
Investment management
 
Investment
InvestmentInvestment
Investment
 
Financial Instruments.pptx
Financial Instruments.pptxFinancial Instruments.pptx
Financial Instruments.pptx
 
Devrivatives in india
Devrivatives in indiaDevrivatives in india
Devrivatives in india
 

More from Sarath Nair

Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Sarath Nair
 
Corporate governance
Corporate governanceCorporate governance
Corporate governanceSarath Nair
 
Business ethics final
Business ethics finalBusiness ethics final
Business ethics finalSarath Nair
 
Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Sarath Nair
 
Corporate governance
Corporate governanceCorporate governance
Corporate governanceSarath Nair
 
Business ethics final
Business ethics finalBusiness ethics final
Business ethics finalSarath Nair
 
032459237 x 168230
032459237 x 168230032459237 x 168230
032459237 x 168230Sarath Nair
 
Leadership styles m.com dharati
Leadership styles m.com dharatiLeadership styles m.com dharati
Leadership styles m.com dharatiSarath Nair
 
Leader ship style
Leader ship styleLeader ship style
Leader ship styleSarath Nair
 
Cultural influences on leadership house
Cultural influences on leadership   house Cultural influences on leadership   house
Cultural influences on leadership house Sarath Nair
 
Characteristics of an entrepreneur
Characteristics of an entrepreneurCharacteristics of an entrepreneur
Characteristics of an entrepreneurSarath Nair
 
19328sm finalnew cp3
19328sm finalnew cp319328sm finalnew cp3
19328sm finalnew cp3Sarath Nair
 
Social n economic role
Social n economic roleSocial n economic role
Social n economic roleSarath Nair
 

More from Sarath Nair (20)

Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01
 
Corporate governance
Corporate governanceCorporate governance
Corporate governance
 
Business ethics final
Business ethics finalBusiness ethics final
Business ethics final
 
Ch2
Ch2Ch2
Ch2
 
Ppt
PptPpt
Ppt
 
Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01Corporategovernance 100404044122-phpapp01
Corporategovernance 100404044122-phpapp01
 
Corporate governance
Corporate governanceCorporate governance
Corporate governance
 
Ch10 final
Ch10 finalCh10 final
Ch10 final
 
Ch2
Ch2Ch2
Ch2
 
Ch2
Ch2Ch2
Ch2
 
Business ethics final
Business ethics finalBusiness ethics final
Business ethics final
 
032459237 x 168230
032459237 x 168230032459237 x 168230
032459237 x 168230
 
Taxation
TaxationTaxation
Taxation
 
Leadership styles m.com dharati
Leadership styles m.com dharatiLeadership styles m.com dharati
Leadership styles m.com dharati
 
Leader ship style
Leader ship styleLeader ship style
Leader ship style
 
Cultural influences on leadership house
Cultural influences on leadership   house Cultural influences on leadership   house
Cultural influences on leadership house
 
Chapter 13
Chapter 13Chapter 13
Chapter 13
 
Characteristics of an entrepreneur
Characteristics of an entrepreneurCharacteristics of an entrepreneur
Characteristics of an entrepreneur
 
19328sm finalnew cp3
19328sm finalnew cp319328sm finalnew cp3
19328sm finalnew cp3
 
Social n economic role
Social n economic roleSocial n economic role
Social n economic role
 

Recently uploaded

DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Mutual Fund
 
New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024Adnet Communications
 
how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.DOT TECH
 
L1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfL1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfmiladsojoudi211
 
how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.DOT TECH
 
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书atedyxc
 
Goldamn report on India's economy in 2024
Goldamn report on India's economy in 2024Goldamn report on India's economy in 2024
Goldamn report on India's economy in 2024ssuser7d2330
 
how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.DOT TECH
 
State Space Tutorial.pptxjjjjjjjjjjjjjjj
State Space Tutorial.pptxjjjjjjjjjjjjjjjState Space Tutorial.pptxjjjjjjjjjjjjjjj
State Space Tutorial.pptxjjjjjjjjjjjjjjjjoshuaclack73
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024DOT TECH
 
Maximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice DiscountingMaximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice DiscountingFalcon Invoice Discounting
 
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书atedyxc
 
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书atedyxc
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfallysaamping
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书atedyxc
 
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书atedyxc
 
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书atedyxc
 
Abhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and LeadershipAbhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and LeadershipVighnesh Shashtri
 
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书atedyxc
 

Recently uploaded (20)

DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024DSP Gold ETF Fund of Fund PPT - April'2024
DSP Gold ETF Fund of Fund PPT - April'2024
 
New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024
 
how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.how to exchange pi coins for USD in 2024.
how to exchange pi coins for USD in 2024.
 
L1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfL1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdf
 
how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.
 
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
 
Goldamn report on India's economy in 2024
Goldamn report on India's economy in 2024Goldamn report on India's economy in 2024
Goldamn report on India's economy in 2024
 
how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.
 
State Space Tutorial.pptxjjjjjjjjjjjjjjj
State Space Tutorial.pptxjjjjjjjjjjjjjjjState Space Tutorial.pptxjjjjjjjjjjjjjjj
State Space Tutorial.pptxjjjjjjjjjjjjjjj
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024
 
Maximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice DiscountingMaximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice Discounting
 
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
 
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书
一比一原版(UC Davis毕业证书)加州大学戴维斯分校毕业证成绩单学位证书
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdf
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
 
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
 
Canvas Business Model Infographics by Slidesgo.pptx
Canvas Business Model Infographics by Slidesgo.pptxCanvas Business Model Infographics by Slidesgo.pptx
Canvas Business Model Infographics by Slidesgo.pptx
 
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
 
Abhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and LeadershipAbhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and Leadership
 
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
一比一原版(BU毕业证书)波士顿大学毕业证成绩单学位证书
 

Investment management 97 zankhana

  • 1. Investment Management What is investment? Investment is the action taken by an individuals or corporate bodies to add value to already controlled asset or resources. This implies that you must not be the owner of whatever resource you invest as your investment. There are so many forms of investment. For example Shares investment, real estate investment, insurance investment, business, bonds etc. Please note that your living home is not an investment, as a lot of people still consider their living home as investment but your home does not bring in any cash flow expect it is sold and until that happens; it still remains a liability and not an asset. In general terms we can say that, investment means the use money in the hope of making more money. In finance, investment means the purchase of a financial product or other item of value with an expectation of favorable future returns. In business, investment means the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create health. Investment has a connotation of a long term holding period, in contrast to speculation, which is the purchase of assets seeking profit from short-term price movement. Speculation has come to mean different things to different people, yet still retain something of its original meaning: namely, to reflect or theorize without a factual basis. As per Keynes, “the activity if forecasting the prospective yield of assets over their whole life,” in contrast to speculation, which means “the activity if forecasting the psychology in the market.” Speculator is somebody who buys something only because they think someone else will pay more for it in the near future, as opposed to an investor, who buys it because analysis confirms that the investment is of high quality and good value, so it is worth holding. A speculator buys things because they expect a less informed person will buy it off them later at a higher price, whereas an investor because they promise both a return on capital invested, as well as a return of capital invested.
  • 2. Unit 5 Derivatives and their Valuation: Options Derivative securities play a large and increasingly important role in financial markets. These are securities whose prices are determined by the prices of other securities. These assets are also called contingent (conditional) claims because their payoffs are contingent on the prices of other securities. Options and future contracts are both derivative securities. Swaps also are called derivatives because the value of derivatives depends on the value of other securities; they can be powerful tools for both hedging and speculation. How does it start? (Options) Trading of standardized options contracts on a national exchange started in 1973 when Chicago Board Options Exchange (CBOE) began listing call options. These contracts were almost immediately got a great success. Options contracts are traded now on several exchanges like The National Stock Exchange Limited in India (NSE), has introduced trading in S & P CNX Nifty options from June 4, 2001 and The Mumbai Stock Exchange (BSE) also started trading on options on Sensex from June 4, 2001. They are known as common stock, stock indexes, foreign exchange, agricultural commodities, precious metals, and interest rate futures. The Options Contract There are two types of options. 1. A call option 2. A put option A call option gives its holder the right to purchase an asset for a specified price, called the exercise or strike price on or before some specified expiration date. For example, a March 2011 call option on Bajaj Auto with exercise price of Rs. 1080 that means its owner have right to purchase Bajaj Auto stock for a price of Rs. 1080 at any time up to and including the expiration date in March 2011. The holder of the call is not required to exercise the option.