Interest Rate Futures
For plain vanilla interest rate derivatives option seller/buyer, it is very important that his position is delta hedged.
Reason : He can make money on gamma .Or he can enter in to an exotic derivative(similar to forward start option) where he need not delta / gamma hedge . Make money trading vega.
However that was not the case with Indian Banks as RBI has strict regulations where banks were forced only to take short positions!!.
Basically , Interest Rate derivatives market NEVER took off because of these restrictions…
Well, what’s the use of Quant specialized in IR Derivatives in India where one can’t even play with both sides of the market ?
Thankfully , Last month there was a ruling which allows Indian banks to take long AND short positions!
Indian markets should now see some action!!