Impact of Financial Derivatives on Stock Market’S Volatility

An analysis of the impact of financial derivatives on stock market volatility

Abstract

Regarding product wise growth of derivatives, the study showed thatStock futures have the credit of sharing 50 to 60 percent share of the totalderivatives market’s turnover during the last five years. The index futuresalso improved their position after March 2003 as their share rose to 33.67percent in December 2006 from 10 percent four years back. Regarding preferenceof options, it was found that the index options are more popular than stockoptions among investors as the former solely contributes 8.29 percent of totalmarket as compared to 3.29 percent share of the later. Interestingly, the calloptions and put options on index are observed more or less equally popularamong the investors particularly after November 2004. Both of them havecontributed above 11 percent in the derivatives market trade.