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FD Sem 3

This document contains an internal examination for a Financial Derivatives course. It includes 5 questions: 1. Defines risk and asks about classifying and managing different types of risk or explains financial derivatives and their types. 2. Asks to write a detailed note on swaps or explain the difference between forward and future contracts. 3. Presents a calculation involving a 3x6 FRA and asks to determine the settlement payment. 4. Presents a scenario about hedging euro receipts through forward contracts and asks about the suitable hedging strategy, calculating theoretical forward rates, and identifying any arbitrage opportunities. 5. Asks to define two of the following terms:

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AAKIB HAMDANI
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44 views

FD Sem 3

This document contains an internal examination for a Financial Derivatives course. It includes 5 questions: 1. Defines risk and asks about classifying and managing different types of risk or explains financial derivatives and their types. 2. Asks to write a detailed note on swaps or explain the difference between forward and future contracts. 3. Presents a calculation involving a 3x6 FRA and asks to determine the settlement payment. 4. Presents a scenario about hedging euro receipts through forward contracts and asks about the suitable hedging strategy, calculating theoretical forward rates, and identifying any arbitrage opportunities. 5. Asks to define two of the following terms:

Uploaded by

AAKIB HAMDANI
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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DR .V .

R GODHANIA COLLEGE OF ENGINEERING AND


TECHNOLOGY, PORBANDAR.
DEPARMENT OF MANAGEMENT (SEMESTER- 3)

INTERNAL EXAMINATION
ACADEMIC YEAR: 2022-2023
SUBJECT: Financial Derivatives DATE: 30/11/2022
SUBJECT CODE: 4539222 TOTAL MARKS: 30
TIME: 90MINS
__________________________________________________________________________________
1) What do you understand by risk? What are the different ways of classifying and managing
them? (7)
OR
Explain the concept of financial derivatives. Explain the types of Derivatives.

2) Write a detail note on swaps. (7)


OR
Difference between forward contract and future contract.

3) IDBI sells a 3 × 6 FRA on February 1 with a principal amount of INR 80,00,000 at an AR of


8.5%. The RR on the FRA is the MIBOR, and the cost of the loan is MIBOR + 250. On the
settlement date, which is one month ahead, the MIBOR is 7.2% and the RR is MIBOR + 250. A
year is said to have 360 days. What will be the settlement payment?

OR

3) Mr. X is Investing in 15000 shares of ABC Ltd. At the 11 months forward contract value of Rs.
1650 each. Assumed risk free rate of interest is 9% compounded continuously. ABC Ltd is paying
dividend of 180 Rs. Per share after 3 months, 6 months and 9 months. What would be price of
forward contract?

4) tata motors exports cars to Japan , and every three months, it receives EUR 700,000 from car
shipments. On March 1, the exchange rate between the Indian rupee and euro is EUR 1 = INR
80.72. the euro interest rate is 6% per annum, while the interest rate in India is 9% per annum.
Hyundai wants to hedge its euro receipt through forward contracts for the next 6 months. The
180-days forward rate is EUR 1 = 81.56. (GTU-2019)
(1) What type of hedging strategy could be suitable for Hyundai?
(2) Calculate the 90 days and 180 days theoretical forward rate.
(3) Identify whether there is any arbitrage opportunity.
(4) If there is an arbitrage opportunity, calculate the arbitrage profit for EUR 500,000.

5) Define terms (any 2) (2)


1) OTC

2) type of risk

3) swaptions

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