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 31–40 of 47 · filtered from 100Clear filters
  1. 063A broker is short 20 lots, lot 50, of the one-month Satpura 50 22,000 straddle on 14% implied volatility. The exchange revalues the position for index moves of minus 6% to plus 6% combined with volatility up or down 4 points. Which scenario is worst, and what margin does it imply?Margin, clearing and risk limitsCoreClearing and riskIndian derivatives desks
  2. 064A book has delta of plus 2,000 shares and gamma of minus 500 shares per rupee. Using the stock and one listed option with delta 0.6 and gamma 0.05, how many options and shares make it delta and gamma neutral?Greeks and managing an options bookCoreEquity derivativesMarket making
  3. 065A bank receives fixed 6.60% on a one-week overnight index swap on Rs 500 crore. Overnight fixings are 6.50%, 6.52%, 6.55%, 6.60% and 6.58%, the last applying to Friday, Saturday and Sunday. Compound the floating leg and compute the net settlement.Interest rate derivativesCoreRates derivativesDerivatives operations
  4. 066A fund holds Rs 50 crore of a stock at Rs 600. The one-month future trades at Rs 597, while carry at 7% says it should be about Rs 603.50. How does switching from the shares into cash plus futures earn extra return, and what if the discount has not closed by expiry?Forwards, futures and arbitrageCoreAsset managementIndian derivatives desks
  5. 072A bank's bond portfolio has DV01 of Rs 12 lakh, concentrated in ten-year bonds. It hedges with five-year payer swaps with DV01 of Rs 4,300 per Rs 1 crore notional. Size the hedge, then work the P&L if two-year yields fall 10 bp, five-year yields fall 3 bp and ten-year yields rise 5 bp.Interest rate derivativesCoreRates derivativesRisk management
  6. 075A stock is at Rs 900 and pays a Rs 10 dividend in one month. The three-month 900 call is 48 and the 900 put 30, rate 7% continuous. Check put-call parity, and if it fails, build the arbitrage.Option pricing and arbitrage checksCoreMarket makingEquity derivatives
  7. 078You are bearish on a stock at Rs 250 over three months. Short the stock with an 8% borrow, buy the 250 put at 12, or buy the 250/220 put spread for 8? Show the outcomes at 200, 240 and 270.Option strategies and trade ideasCoreHedge fundsEquity derivatives
  8. 082A six-month range accrual on USD/INR pays 8% a year for each day the fix is between 82.00 and 85.00. Ninety of 125 fixing days fall inside. What is the coupon, and what is the client short?Structured products and client solutionsCoreStructured productsFX derivatives
  9. 083The index is at 22,000, the one-month future at 22,120, the rate 6.8%, the dividend yield 1.2% and round-trip costs 0.08%. Is a new cash-futures arbitrage worth putting on, and what return does the basis lock in?Forwards, futures and arbitrageCoreAsset managementIndian derivatives desks
  10. 084A pension trust holds Rs 1,000 crore of government bonds with modified duration 7.2 and wants duration 4.0 for three months. A bond future has a DV01 of Rs 1,850. How many contracts, which side, and what risk remains?Hedging with futuresCoreRates derivativesAsset management

Company names and figures are illustrative.