Anath Baam

Institute of
Management Technology
2\A2HPAb
Hyderabad
f-A

Midterm Examination
Academic Year 2022-23
Term - IV, Batch 2021-2023
Course Code : FIA401
Course Title :Financial Derivatives
Date :09-August-2022
Time :11:15 AM - 12:15 PM

Day : Tuesday
Exam Duration :60 minutes

Instructions:

Maximum Marks: 20 Marks

Exhibit 1: Screen Shot of Option Chain of Coal India Stock: Hint: Spot price of Coal india @Time Stamp Mentioned Below is 209.55

Home Live Market Option Chain Equity Derivatives Options Contracte

Dption Chain (Equity Derivatives) Underlying Stock: COALINDIA 209.55 As on Jul 29, 2019 11:03:52 IST
View Options Contracts for: Select Index OR Search for an underlying stock: GO Filter by: Expiry Date 29AUG2019 Futures contracts
CALLS PUTS
LTP Net Chng Bid Bid Ask
Chart Chng in Ol Volume Ask Strike Price Bid Bid Ask
AskNet Chng LTP Volume Chng in Ol Char
Qty Price Price Qty Qty Price Price Qty
4,400 48.75 51.35 4,400 160.00 0.60 8,800
55.000 40.45 53.85 55.000 165.00 0.45 4,400
55,000 36.00 48.65 55,000 170.00 2,200 0.15 0.25 2, 200 0.25 40.03 4,400 13,200
55,000 32.75 40.35 55,000 175.00 4,400 0.10 0.90 30, 800
44,000 27.70 33.20 6.600 180.00 2,200 0.35 0.90 4,400 22,000
8,800 24.10 26.65 2,200 185.00 26,400 0.25 0.90 2,200 4,400
2,200 21.05 22.00 6,600 190.00 11,000 1.15 1.25 8,800 0.05 1.15 32.36 2,200 209,000
4,400 16.75 17.60 4,400 195.00 4,400 1.85 1.95 4,400 0.10 1.80 31.24 2.200 101,200
33.000 3 28.33 14.20 -0.30 4,400 13.15 13.90 6,600 200.00 4,400 3.00 3.10 11,000 0.20 2.95 31.18 84 33,000 484,000
28,600 6,600 527.60 10.60 -0.50 2.200 9.75 10.35 2,200 205.0o 11.000 4.60 4.75 8,800 0.25 4.50 30.90 52 28,600 209,000
332,200 39,600 58 27.23 7.70 -0.45 4.400 7.20 7.50 2.200 210.00 2,200 6.80 6.95 6,600 0.20 6.50 30.85 73 22,000 437,800
360,800 4.400 45 27.77 5.40 -0.35 2.200 5.20 5.30 2,200 215.00 11,000 9.50 9.85 6,600 9.10 30.32 4 2,200 165,000
627,000 46,200 107 28.56 3.90 -0.20 6,600 3.65 3.75 8,800 220.00 2,200 12.75 13.20 2,200 0.45| 12.65 32.13 5 6,600 281,600
264,000 17,600 51 29.16 2.65 -0.05 4,400 2.45 2.55 11,000 225.00 6,600 16.40 17.80 41,800 0.85 16.60|34.10 3 -2,200 59,400
785,400 15,400 122 29.44 1.70 -0.20 2.200 1.70 1.75 13,200 230.00 2.200 20.70 21.35 4,400 20.30 33.24 85,800
81,400 4,400 13 30.61 1.20 -0.05 6.600 1.05 1.25 6.600 235.00 13,200 24.20 26.20 2,200 22,000
512,600 15,400 27 31.24. 0.80 -0.05 6.600 0.70 0.80 22,000 240.00 6,600 29.55 30.80 2.200 0.45 28.45 28.91 101,200
30,800 2,200 0.25 0.70 6,600 245.00 2,200 33.00 35.65 2,200 17,600
184,800 4,400 232.45 0.35 4,400 0.30 0.35 13,200 250.00 2,200 38.40 41.30 4,400 57,200
11,000 4,400 0.10 0.30 4,400 255.00 55,000 37.80 47.70 2,200 15,400
24,200
149,600 4,400 0.20 0.30 260.00 55,000 41.90 55.85 55,000 30,800
30,800 19,800 0.05 0.45 4,400 265.00 55,000 46.75 61.45 55,000 8,800
4,400 24,200 0.05 0.35 4,400 270.00 55.000 50.20 67.15 55.000 11,000)
 Financial Derivatives: Mid Term ELXam: (20 Marks): 6ÖMin..toe.
Answers to be marked on the questios papers in the space provided
Please-answer the questions 1 to 4 based on the Exhibit 1:
1. What is theintrinsic of the Call option contracts with Strike Price of 215
2._What is the Time value of the call option contract with strike price of 215 SA0
3. What is the Intrinsic value of Put option contract with strike price of 215 SAS
4. What is the time Value of the Put option contract with strike price of 215 3b5
Suppose you buy an asset at $50 and sell a futures contract at $55. What is your (profit or loss) if, prior to expiration, you sell the asset at
$55 and buy futures at $58? Pat$2

L6. In Period 1,Trader Abuy 3Futures Contract and Trader BSells 3Futures Contract. In period 2, Trader CSells IFutures Contract and
Trader Dbuys 1Futures Contract. Compute the open interest at the end of period 2.

7. Akasa Airways has determined that the price of jet fuel is 1.2 times as sensitive as the futures price of oil. If the airline company would
like to hedge the purchase of 200, 000barrels of jet fuel and the contract size of each oil futures is 1000 barrels, what shouldthe company
do? Long Or Short? ngHowmany Contracts? 240
futies
8. An investor goes short on a Silver futures contract. Size ofthecontract is for 100 ounces, initial margin is $ 2500 per contract and
maintenance margin is $ 1500 per contract. On a day, opening balance wasS 1700,and futures close at $ 200.00 (price per ounce). The
previous day's close was $202.5. The closing Balance is 145o The margin call willbe _(write zero if no margin call)
9Currently, the Nifty (Index) is at 11,170 andtheannualized risk free rate is 6.00%. Futures contract on Nifty expiring one month fronm now
trades at I1,250. What is the arbitrage profit/youcan make out of this mispricing (Assume cost of carry modelholds and there are no
restrictions
What shouldonbeshort sclling, cost of lending and borrowing are the same. lgnore Dividend Yield)? Arbitrage Profit or loss if Any DÀ Poft
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the asset declines
A The contract becomes more valuable as the p1 te asset rises
e. The contract becomes more valuable as the pri
C. The contract is worth zeroif the priceof the as iines after the contract has been er ered into
D. The contract isworth zero if the price of the as: s after the contract has been ente ed into

State whether the statements are true (T) or false (F)( Vrite T/F before the letter a,b.c. Stc..) (5 Marks)

AU.S. manufacturer who buys goods auic. 1st likely to hedge foreign exchar 3e risk by going short in Foreign Currency
Fb. Basis at maturity is never Zero
Tc. If basis at the start is negative and you are in ng tedge ( long in utures). The pesition at maturity is always unfavorable
d. Gold and silver are considered tobe consur ass ts andcopper i considered as ivestmeni asset
e. An increase in volume associated with increa i ope interest means many operators are squaring up the position.
In general the basis risk increases as the time dii! ence between hedge expiration and delivery month increases.
Tg. Futures Contract have no Counter Party Risk wh eas Forward Coni acts have counter party Risk
h. Futures Contracts are trading on Exchanges wh : as Forward Contrac ts are Not
Fi. lfthe minimum variance hedge ratio is caleulated: 1,then the hedge is perfect
Ei For aput option, everything else remaining the sar: as st ike prices decreases option prices increases