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
Showing 1–10 of 52 · filtered from 100Clear filters
  1. 002A market maker faces order flow of which 20% comes from traders who know the price will move Rs 4 in their favour. What half-spread breaks even, and what happens when the informed share doubles?Market making and trading scenariosCoreMarket makingQuant trading
  2. 003A vendor option chain on a stock at 1,000 shows the 950 call at 45, the 1,000 call at 30 against the 1,000 put at 22, and the 1,050 call at 32. Find every error and the arbitrage each allows.Option pricing and arbitrage checksCoreModel validationRisk management
  3. 005A Rs 500 crore equity fund with a beta of 1.15 wants its beta at 0.6 through a results month using index futures at 22,000 with a 50 unit contract. How many contracts, which side, and what is the fund still exposed to?Hedging with futuresCoreAsset managementEquity derivatives
  4. 006A jeweller needs 100 kg of gold in six months. Spot is Rs 72,000 per 10 g, the six-month future Rs 74,500, storage 0.4% a year and the rate 7%. Buy now and store, or buy the future, and what is the market saying?Forwards, futures and arbitrageCoreCommodities tradingCorporate treasury
  5. 009A fund is short one-month and one-year index straddles, each with vega of Rs 1 crore per point. A 5% one-day fall lifts one-month volatility 12 points and one-year 4. Which loses more, and what else hits the one-month?Volatility tradingCoreVolatility tradingMacro trading
  6. 010A company pays fixed 7.5% semi-annually on a Rs 100 crore swap with two years left. Given the four discount factors, find today's par swap rate and the swap's value to the company.Interest rate derivativesCoreRates derivativesDerivatives operations
  7. 013A client with Rs 5 lakh sells two lots of out-of-the-money index calls at Rs 1.4 lakh margin a lot. A volatility spike and a rally raise margin to Rs 3.1 lakh a lot and the calls lose Rs 60,000. What happens, and what are the client's choices?Margin, clearing and risk limitsCoreIndian brokingRisk management
  8. 014USD/INR spot is 83.00, one-year rupee rates 7% and dollar rates 5%, and the one-year forward is quoted at 85.50. Is that consistent with covered interest parity, and if not, build the arbitrage for USD 10 million.Currency derivatives and corporate FX hedgingCoreFX derivativesRates derivatives
  9. 016Build a DV01-neutral two-year versus ten-year swap steepener with Rs 100 crore of ten-year, given DV01s of Rs 190 and Rs 700 per crore. Size the two-year leg and find the P&L if two-year rates fall 20 bp and ten-year rates rise 5 bp.Interest rate derivativesCoreRates derivativesMacro trading
  10. 020The index is at 22,000, the one-month future at 22,100 and the two-month future at 22,300, with one month of carry worth 0.47%. Which leg is mispriced, what calendar spread follows, and what can go wrong before expiry?Forwards, futures and arbitrageCoreIndian derivatives desksMarket making

Company names and figures are illustrative.