r-' ir .
24{',5-816 - rrs MBA (R) _ M _ 16
SECONDSEMESTERM.B.A. (CBCS)DEGREE NXEUINETTON,MAY 2016
816: DERTVATIVES IUARKETS
t'une : 3 HoursJ
lMdx. Marks : 50
!
\ sEcTroN-A C0xr=10)
Q, 1. Answerany TEN out of rwELvE of the fo owingsub:quesrions,
Eachquestion
caniesONE mark.
a7 wnarareoerivatives?
b) WhoarecalledSpeculators
in derivatives
market?
c) Givethemeaningof ,,Costto Csrry'.
d) Whatis basisrisk?
e) Whatarethemajorstock Indicesin India?
)
D Whatdoyoumeanby a shortpositionin stocks?
g) Whatdoyoumeanby Shortstocklongcall?
i h) whatis a';covered"
call?
i) Whatis anIndexnumbef
j) S.tate
anl four ForwardContractSpecifications,
'
k) When and holv are the cash flows of a swap.equivalentto thoseof a bond,
portfolio?
|)WhatisthepresentValueapproachtopricingaswap?'
SECTION-B (4Xs=20)
Answerany FOUR questions.
Eachquestioncaries FIVE ffisrkS;
Q 2 "Futurescontracts'are
improvisedforwardcontracts".Do you agree?Explain
Q. 3. Whatdo you understand
by optimalhedgeratio?How canit be determined?
Discuss.
Q. 4. Calculate
the priceof a fonvard.contract
usingthe followingdata:
Priceof the share : Rs.75.
Time to expiration I 9 months,
Dividendexpected : Rs.2.20pershare
tP'T'O'
2485- 816 - nS MBA (R) - M 16
Timeto divldend : 4 months
Continuously
compounded
risk-freerateof return : 12Yoperannum
Q. 5. From the following case,namethe strategyadoptedand talculatetho profiVlossfor
differentpricerangesof the stocktakingSr a Ez,Er < Sr < Ezand Sr a E. Also, determine
thebreak-even stockprice.
Type of Option ExercisePrice of Option Premiumon Option
Purchased
(Rs) Sold (Rs) Purchased(Rs) Sold (Rs)
Put 50 65 4 il
Q. 6. Firm A hastwo financialagreements with Firm B. One is an interestrateswapwith a
notionalvalueof Rs.20 lakh.The otheris a commercialloanwith a principalvalueof Rs.20
lakh.Firm A considerstheswapmuchlessriskythanthe loan.Why is that?
SECTION-C (t XrO = t0)
. Answerany ONB questionwhichcarriesTEN rnarks.
Q. 7. How would you usea forwardswapto lock the rateyou will pay on debt issuedin the
future?{xplain with example.
Q, 8. From the following data, obtain the call anclput option valuesbasedon Black &
Scholesformulation:
Stockprice Rs.206
Exerciseprice Rs.200
Timeto expiration 47days
Standard
deviationof thecontinuously
compounded
rateof returnon stock 0.26
Continuously
compounded
rateof return 8%
Also obtainthevaluesof variousGreeks.
.1
3 2 4 8 5 - 8 1 6 - r r s M B A ( R )- M - 1 6
I
Compulsory
Q'9.For a given share,the pricesare observedfor 13 daysand are recorded.,below
along
with the indexvalueson thosedays.
You are requiredto regressthe returnson the shareon.the returnson the index.What'does
thebetq the regression
coeffibient,indicate?
Day SharePrice Price of Share
Index
I 1376.15 818,35
2 1388.75 8lI .75
3 1408.85' 8r 9.85
4 14r8.00 836.05
5 1442.85 815.65
6 1445. I5 804.30
7 1438.65 80r.30
8 t447.55 7s23A
I 1439,70 778.30
10 .t427.65 744.95
il 1398.25 718.35
l2 1 4 0r . 4 0 n7.5A
l3 1419.70 735.55
