A STUDY OF INVESTOR’S PERCEPTION TOWARDS DERIVATIVES AS AN INVESTMENT AVENUE

Abstract

The dissertation aims to find an investor’s perception to derivatives as an investment strategy. Derivative instruments are financial instruments which are complex then the other financial instruments but have some special properties which lure the investors to invest in them. Derivatives are risk management tool that help in effective management of risk by various stakeholders. Derivatives provide an opportunity to transfer risk, from the one who wish to avoid it; to one, who wish to accept it.

The study is based on the primary data collected through questionnaire from the retail investors. The investors are individuals who have invested in the derivatives market with an aim to reduce risk or to get higher returns. The research aims to identify any relation between the age group and income group of those investors with their behaviour to invest in Derivatives instruments. Also some of the factors, which affect the decision to invest in a particular derivative, were identified and studied.

The result of present study states that investors considers many factors such as guidance from financial advisor and broker hedging fund, risk control, their own knowledge regarding financial product, and high volatility in the stock market etc. while taking decision to invest in derivatives. The conclusion to this study is that there is a significant positive correlation with age of the respondents and a negative correlation with annual incomes of the respondents with respect to decision to invest in derivatives. Also result shows that investors give more preference to some factors such as hedging fund, risk control, their own knowledge regarding financial product, and high volatility in the stock market etc. while taking decision to invest in derivatives.