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CHAPTER – I INTRODUCTION 1.1 ABOUT THE STUDY Investing in secur ities suc h as shares, debentures, bonds are profitable as well as exciting. It is indeed rewarding but involves a great deal of risk. Investing in financial securities is considered to be one of the vast avenues for investing one’s savings. Risk management is a discipline th at enables people and organizations to cope with uncertainty by taking steps to protect its vital assets and resources. Risk can be explained as uncertainty and is usually associated with the unpredictab ility of an invest ment performan ce. All investments are subject to risk, but some have a greater degree of risk than others. Risk is often viewed as the potential for an investment to decrease in value. Derivatives are the instruments most commonly used in financial risk management. The Derivatives are exch ange traded contracts like futures, options etc. Such a contract is built upon a tradable asset or assets like equities, stock indic es, and commodities and so on.  Because unique derivative contracts tend to be costly to create and monitor, the most cost-effective financial risk management methods usually involve der ivatives that trade on wel l-established financial markets. The most important element of managing risk is keeping losses small; never give in to fear or hope when it comes to keeping losses small. 1

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