Equity Derivatives: A Beginner's Module (Foundation) Practice Exam

Equity Derivatives: A Beginner's Module (Foundation) Practice Exam

Equity Derivatives: A Beginner's Module is a foundation-level certification exam that equips you with the essential knowledge and understanding of equity derivatives, financial instruments used to manage stock market risks and potentially magnify gains.

Who Should Take This Exam?

This NCFM certification is ideal for:

• New Investors: Gaining a solid foundation in equity derivatives before venturing into using them for your investments.
• Finance Professionals: Individuals aspiring to careers in financial services, wealth management, or the equity derivatives market.
• Anyone Interested in Equity Derivatives: Investors curious about how equity derivatives work and their potential role in a diversified portfolio strategy.

There are no formal prerequisites for taking this exam.

Roles and Responsibilities 

• Equity Derivatives Trader: Executing trades in equity derivatives like options and futures contracts.
• Risk Management Analyst (Equity Derivatives Focus): Assessing and mitigating risks associated with equity derivative positions for companies or financial institutions.
• Portfolio Manager (Equity Derivatives Integration): Incorporating equity derivatives into investment portfolios for risk management or potential return enhancement.
• Financial Advisor (Equity Derivatives Focus): Providing investment advice to clients that may incorporate equity derivatives for specific risk management or investment objectives.

These roles typically require additional qualifications, experience, and potentially a license to operate in the financial markets.

Exam Details

• Duration: 120 minutes
• No. of questions: 60
• Maximum marks: 100, Passing marks: 50 (50%); There is no negative marking in this module.
• Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.

Course Outline

The exam covers the following topics:

1. Introduction, Definition and Applications of Derivatives

• Definition and origin of derivatives; Definitions of forwards; futures; options; Moneyless of an option; Participants in the derivatives market and uses of derivatives.

2. Trading Futures and Options

• Pay-off of futures; Theoretical model for future pricing; Option prices.

3. Derivatives Trading on the Exchange

• Derivatives trading and settlement on NSE; using daily newspapers to track futures and options; Accounting and taxation of derivatives.