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Roles & participants (8 cards)
- What is SEBI?
- Securities and Exchange Board of India. Regulates mutual funds, distributors, and the derivatives segments covered in this exam.
- What is AMFI?
- Association of Mutual Funds in India — an industry body (not a regulator) issuing the ARN and policing the distributor Code of Conduct.
- What is Sponsor?
- The promoter who sets up the mutual fund trust.
- What is Trustees?
- Oversee the AMC on investors' behalf; at least two-thirds must be independent.
- What is AMC?
- Asset Management Company — runs the fund's day-to-day operations.
- What is Hedger?
- Uses derivatives to reduce an existing risk exposure.
- What is Speculator?
- Takes a directional derivative position to profit from an expected price move.
- What is Arbitrageur?
- Exploits price discrepancies between markets for a near risk-free profit.
Core definitions (19 cards)
- What is Net Asset Value (NAV)?
- The true worth of one unit of a scheme — Net Assets ÷ Outstanding Units.
- What is Total Expense Ratio (TER)?
- All permitted costs charged to a scheme: base expense ratio + brokerage + transaction cost + statutory levies.
- What is ARN?
- AMFI Registration Number — mandatory for anyone distributing mutual funds.
- What is EUIN?
- Employee Unique Identification Number — identifies an employee of an institutional distributor, operating under that institution's ARN.
- What is SID?
- Scheme Information Document — everything specific to one scheme.
- What is SAI?
- Statement of Additional Information — fund-wide statutory information.
- What is Forward contract?
- A customised, OTC agreement to transact at a set price on a future date.
- What is Futures contract?
- A standardised, exchange-traded, daily-margined version of a forward.
- What is Open interest?
- The total number of outstanding (not yet settled) derivative contracts.
- What is Intrinsic value?
- The in-the-money portion of an option's premium.
- What is Time value?
- The portion of an option's premium beyond its intrinsic value, reflecting time remaining to expiry.
- What is Put-call parity?
- The formula tying a call, a put, and the underlying's price together for the same strike/expiry.
- What is Delta-hedging?
- Constructing a position momentarily insensitive to small moves in the underlying, using an option's Delta.
- What is Free-float market capitalisation?
- Index weighting method based on shares actually available for public trading, not total shares outstanding.
- What is Term structure of interest rates?
- The yield curve — yields plotted across different maturities.
- What is Spot rate (zero rate)?
- The yield on a zero-coupon instrument for a specific maturity.
- What is Accrued interest?
- Interest accumulated since the last coupon payment, owed to the seller on a bond sale.
- What is Basis risk?
- The risk that a hedge's underlying imperfectly matches the hedger's actual position.
- What is OTC derivative?
- A customised, bilaterally-negotiated derivative without central clearing.
Formulas & ratios (4 cards)
- Formula for Sharpe Ratio?
- (Return − Risk-free) ÷ Standard Deviation — Excess return per unit of TOTAL risk.
- Formula for Treynor Ratio?
- (Return − Risk-free) ÷ Beta — Excess return per unit of MARKET risk (Beta).
- Formula for Futures contract value?
- Futures Price × Lot Size — Contract value from the futures price.
- Formula for Cost-of-carry futures price?
- Spot Price + Cost of Carry (financing cost − dividend yield) — The theoretical futures price model.
Key numbers (11 cards)
- V-D exam structure?
- 150 Q / 150 marks — 150 questions, 1 mark each.
- Exam duration?
- 3 hours — Time allowed to complete the full V-D exam.
- Passing score?
- 60% (90/150) — Minimum percentage required to pass.
- Negative marking?
- 10% per wrong answer — Deducted from the score for each wrong answer.
- Module 1 — Mutual Fund Distributors?
- 68 of 150 marks — Chapters 1–12, same ground as V-A.
- Module 2 — Equity Derivatives?
- 52 of 150 marks — Chapters 13–17 — the heaviest module.
- Module 3 — Interest Rate Derivatives?
- 30 of 150 marks — Chapters 18–22.
- IRF lot size?
- Notional Rs. 2 lakh (2,000 bonds) — One lot of IRF on a GOI security.
- IRF tick size?
- Rs. 0.0025 — Minimum price movement for IRF contracts.
- IRF expiry day?
- Last Thursday of the month — Standard expiry day for IRF contracts.
- IRF underlying maturity buckets?
- 4–8, 8–11, 11–15 years — Residual maturity ranges for GOI security IRF.