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 1–4 of 4 · filtered from 100Clear filters
  1. 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
  2. 053A five-year convertible with Rs 1,000 face converts into 8 shares. The stock is Rs 110, the straight bond is worth Rs 880 and a five-year call struck at Rs 125 is worth Rs 25. Value the convertible and its conversion premium.Option pricing and arbitrage checksCoreEquity derivativesCredit trading
  3. 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
  4. 098A stock is at Rs 250. Price a six-month 260 call by Black-Scholes with 30% volatility and a 6% rate: compute d1, d2, the two probabilities and the call, then the put by parity.Option pricing and arbitrage checksCore

Company names and figures are illustrative.