Derivatives Foundation case studies, worked step by step

Cases
100
Traced to a firm
12
Topics
12
Hard
29
Topic
All topicsMargin, clearing and risk limits8Market making and trading scenarios8Option pricing and arbitrage checks8Option strategies and trade ideas10Hedging with futures8Forwards, futures and arbitrage8Volatility trading8Interest rate derivatives9Structured products and client solutions7Currency derivatives and corporate FX hedging9Credit derivatives and counterparty risk7Greeks and managing an options book10
Level
AnyWarm upCoreHard
Source
AnyReported at a firmStandard
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  1. 036Belvora Textiles will receive USD 5 million in three months. Spot is 83.20 and the three-month forward 83.85. What does selling the dollars forward lock in, and how does it compare with staying open if the rupee ends at 81.00 or 85.00?Currency derivatives and corporate FX hedgingWarm upFX derivativesCorporate treasury
  2. 069An exporter has sold USD 20 million forward at an average of 83.10. Forwards for the same dates are now 85.00, and the board sees a mark-to-market loss. Compute it, and explain why it is not the whole story.Currency derivatives and corporate FX hedgingWarm upCorporate treasuryFX derivatives

Company names and figures are illustrative.