Derivatives Market (Dealers) Module (DMDM) Module (Intermediate) Practice Exam

Derivatives Market (Dealers) Module (DMDM) Module (Intermediate) Practice Exam

Derivatives are recognized as highly potent financial tools. The Indian equity derivatives market has witnessed substantial expansion since their introduction in 2000. The Derivatives Market (Dealers) Module (DMDM) offers a comprehensive understanding of various equity derivative types, encompassing their trading, clearing, settlement procedures, and regulatory framework. This module serves to:

• Educate on fundamental aspects of the derivatives market.
• Illuminate the utilization of derivative products for speculation, hedging, and arbitrage.
• Provide insight into trading dynamics, clearing, settlement processes, and risk management within equity derivatives.
• Offer knowledge on regulatory, accounting, and taxation aspects pertinent to equity derivatives.

Who should take the exam?

The exam is best for:

• Students
• Stock Brokers and Sub-Brokers dealing in derivatives
• Custodians and Employees of Mutual funds
• Individual investors as well as High Networth Individuals (HNIs)
• Portfolio Managers
• Financial Institutions
• Anybody having interest in the Stock market operations

Exam Details

• Exam Name: Derivatives Market (Dealers) Module (DMDM) Module (Intermediate)
• Exam Languages: English
• Exam Questions: 60 Questions
• Time: 120 minutes
• Passing Score: 60%

Course Outline 

The Exam covers the given topics  - 

Topic 1: Overview of Derivatives

• Types of Derivative Contracts, History of Financial Derivatives Markets, Participants in a Derivative Market, Economic Function of the Derivative Market

Topic 2: Learn about Interest Rates and Stock Indices

• Understanding Interest rates, the Stock Index, the Economic Significance of Index Movements, Index Construction Issues, Desirable Attributes of an Index, Applications of Index.

Topic 3: Understand Futures Contracts, Mechanism and Pricing Forward Contracts

• Limitations of forward markets, Introduction to Futures, Distinction between Futures and Forwards
• Contracts, Futures Terminology, Trading Underlying vs. Trading Single Stock Futures, Futures Payoffs, Pricing Futures, Pricing Stock Futures.

Topic 4: Application of Futures Contracts

• Understanding Beta, Numerical illustration of Applications of Stock Futures

Topic 5: Understand Options Contracts, Mechanism and Applications

• Option Terminology, Comparison between Futures and Options, Options Payoffs, Application of Options

Topic 6: Learn about Pricing of Options Contracts and Greek Letters

• Variables affecting Option Pricing, The Black Scholes Merton Model for Option Pricing (BSO), The Greeks

Topic 7: Trading of Derivatives contracts

• Futures and options Trading system, the trader workstation, Future and options Market Instruments, criteria for stocks and index eligibility for trading charges.

Topic 8:  Clearing and Settlement

• Clearing Entities, Clearing Mechanism, Settlement Procedure, Risk Management, Margining System

Topic 9: Learn about Regulatory Framework

• Securities Contracts (Regulation) Act, 1956, Securities and Exchange Board of India Act, 1992, Regulation for Derivatives Trading, Adjustments for Corporate Actions

Topic 10: Understand Accounting for Derivatives

• Accounting for futures, Accounting for options, Taxation of Derivative Transaction in Securities