Derivatives and Financial Risk Management — DU Bachelor of Management Studies Previous Year Question Papers

4. Semester : VII 5. Max Marks : 90 Marks 6. Max Time : 3 Hrs QI: Explain the following: 1. Long Hedge 2. Price Risk 3. Counterparty Risk 4. Direct Quote 5. Cross Currency Pair Q2: Answer the following: 1. Spot value of Nifty is 26157. An investor buys a one-month nifty 26140 call option for a premium of Rs.27. Calculate Net and Gross P/L of buyer and seller of option, If nifty close at 27300 P/L. 2. SBI trades in the spot market at Rs. 950. Money can be invested at 11.5% p.a. Calculate 1 month Future of SBI futures contract. Q3: On 1st Jan 2025, Mr. Alok an exporter enters into a forward contract with SBI bank to sell 100,000 USD on 31s March 2025 @ 89.40. 1. Mr. Alok received information about the cancelation of the original deal from the counterparty on the date i.e., 26"h Feb 2025. Therefore, Mr. Alok requested the SBI bank to cancel forward before the due date i.e., 28th Feb 2025. Inter Bank rate on 26"h Feb 2025 was as follows: One-mc}nth premium 15/20 Mr. Alok received information about the cancelation of the original deal from the counteaparty on the dateofmaturityofthecontract.Therefore,Mr.AlokrequestedtheSBIbanktocancelforwardcontract. One-mdnth premium 15/20 Additional Information for both parts Interest rate @ 112%. The bank charge 1 % on each trade Calculate the net cash Inflow/Outflow of Mr. Alok Stperiodup Factor= 1.23 . 2nd period Do\inFactor= 0.87 •. Interest Rate = 5.55% 1. Call premium.(two-period model). 2. Put premium (two-period model). Q5: Draw the payoff ;diagrams of the following spreads/combinations along with all the trades executed to construct each spread/combination. Payoff diagrams without drawing the executed trades used to construct the spreads/combinations tyill be awarded zero marks. 1. Butterfly spread (Call) 2. Bull spread (Put) 3. Bear spread (Call) Q6: Calculate the Call and Put delta. Construct zero delta portfolio with call and spot and, zero delta portfolio with call and spot r (risk-free rate) = 5.5% (time to expiry) =45 days