Financial and Commodity Derivatives — DU B. Voc – Banking Operations Previous Year Question Papers

Q.1 CH Q.3 a) Discuss the key characteristics of financial derivatives and explain the specific roles of Ledgers, speculators, and arbitrageus. b) Briefly discuss the growth and development of lndia's derivatives market. VAat are th?majorunderlyingassetstradedonlndianexchangestoday? Or a) Differendate between the cash (spot) Inarket and the futures market. Outline three majorreasonsaninvestorndghtpreferthefuturesmarkettothecashmarket. b) Explain the futures trading mechanism, with a specific focus on "Marking-to- a) Ira security is cunently priced at Rs. 300 in the spot market, calculate its forward price for a 1-month contract, assuming a continuously compounded risk-free interestrateof7%peraunum. b) Discuss the various types of margins in futures trading: hitial Margin, Maintenance Or a) The NHTY hidex is cunently at 1195. The historical dividend yield on the index is 3% p.a., and the bonowing rate i§ 9.5% p.a. Conceptually, explain the fomula you wouldusetocalculatethefairvalueofa3-monthfuturecontract b) Distinguish between Forwards and Options. Furthermore, explain the difference betweenaEuropeanOptionandanjinerieanOption. Or a) A stock is trading at Rs. 50. A call option with an exercise (strike) price of Rs. 48 is trading at a premium of Rs. 3. Calculate the intrinsic value and the time value of this option. b) Discuss in detail the important terms associated with option contracts: Moneyness (In-the-money, At-the-money, Out-of-the-money) and Strike Price. Give a brief example of an "Exotic Option." a) Equity shares of TCS Ltd. are currently available at 722 per share. An investor buys a Call option with a strike price of 720 for a premium of 75. Calculate the investor's net profit or loss if the stock price on the expiration date is (i) {15, and (ii) 728. b) Define the term SWAP. Detail the mechanisms and features of an Interest Rate SWAP and a Currency SWAP: Or a) Cash Rich Ltd has invested Rs 50 crore in market-linked floating rate securities. b) What is a Credit Default Swap (CDS)? Explain how it operates like an insurance contract against default risk. Additionally, define a "Putable Swap," a) The current spot price is high, and they fear it will rise further. Explain how they can use a "long hedge" in the commodity futures market to lock in their purchase price today. b) Explain the concepts of Straddle and Strangle option trading strategies. Under what market conditions would a speculator use a long straddle? Or a) An Indian importer needs Rs 2,00,000 to pay for imports after 90 days. The current spot rate is INR 81.50, and the 3-month forward rate is INR 82.22. Explain why the importer should use a forward hedge and calculate the locked-in rupee cost of the b) Dares dir various ricks involved in eding erivatives 08, Mate Rial Counterparty Risk, Liquidity Risk, Operational Risk)