In the global derivatives markets options are main derivatives and familiarised known as the option contracts. Option is the right but not a compulsion. The basic objectives of this article are to check whether there is any important difference between one country of exchange to another region of exchange in terms of the number of agreements and contracts traded at stock index options. National value of contracts and option premium of stock index option and also the relationship between each other along with the suitable guidelines to have an efficient performance of stock index options.
The data extracted from the SEBI-Hand Book and the whole data synchronised into three regions namely Americas, Asia-Pacific and Europe–Africa and Middle East. It is observed that weak relationships and negatively correlated between the regions of Americas stock exchanges to the Asia – Pacific stock exchanges. Further found that there was a significant difference between each other’s nations. Lastly, it is recommended to introduce the innovative stock index options to view a good performance regarding the minimisation of risk factors at global level. These aspects of the stock exchanges are taught at some of the best MBA colleges in Nashik to management students.
Derivative is nothing but a financial instrument, which derives its value from another asset which is called as the underlying asset. The underlying asset means commodities, foreign exchange, bonds, stock indices etc. The good examples of derivatives are futures, options, swaps options, interest rate derivatives and others are credit derivatives, exotic options etc. Option is the right, but not an obligation. Option holders may perform or may not perform the option at maturity date. To acquire such a beautiful right the option holder has to pay the option premium to the other party. Where the right belongs to the purchase of shares, it is called as call option, where it is relevant to sale of security, it is called as put option. The option premium consists of intrinsic value and time value. The stock market index options are one of the good options contracts in the global derivatives markets.
Index Options of Stocks in Various Countries Stock Exchanges
1. The number of contracts traded on the Stock Index happened regarding Europe – Africa and the Middle East followed by the Americas and Asia – Pacific exchanges.
2. It is observed that the poor relationship happened between the greater number of contracts traded of Stock Index options of Europe –Africa and Middle East exchanges to the Americas exchanges, and the same way moderate relationship existed between Asia–Pacific to Europe, Africa and Middle East are negatively correlated from the Americas exchanges to the Asia–Pacific exchanges.
3. Also observed, there was a more difference between the number of contracts traded of Stock Index Options of Europe–Africa -Middle East exchanges to the Americas exchanges, and from Americas exchanges to the Asia – Pacific exchanges, and also from Europe – Africa – Middle East exchanges to the Americas exchanges.
4. It was found that notional value of contracts traded of Stock Index Option regarding Asia – Pacific exchanges are higher than the Americas exchanges and Europe – Africa – Middle East exchanges.
5. Another observation is that a good relationship existed between Europe – Africa -Middle East exchanges to the Americas exchanges, and no relationship existed between Americas exchanges to the Asia – Pacific exchanges and the poor relationship existed between Asia – Pacific and Europe – Africa – Middle East.
6. Moreover, there was a significant variation between Americas exchanges to the Asia – Pacific exchanges and from Asia – Pacific exchange to the Europe – Africa -Middle East, but there was no significant variation between Europe –Africa -Middle East to Americas exchanges in terms of notional value of contracts traded of Stock Index options.
7. It is known that notional value of contracts traded of Stock Index Options reveals that, the good relationship between Europe–Africa-Middle East exchanges to the Americas exchanges. Further there was no relationship between Americas exchanges to the Asia–Pacific exchanges and held a moderate relationship between Asia–Pacific exchanges to the Europe – Africa – Middle East exchange, and also found that there was a significant difference between each other.
Conclusion
It is concluded that there is a poor relationship between one country of stock exchange to another country of stock exchanges in relation to a greater number of contracts traded, national value of contracts traded, open interest in number of contracts and option premium of stock index options. Therefore, it was recommended to introduce the modern product mix along with the Stock Index Options to view a good performance in the international derivatives markets. Students pursuing MBA in Financial Management from one of the top B schools in Maharashtra are better-equipped to deal in stock exchanges around the world.