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 11–20 of 29 · filtered from 100Clear filters
  1. 028A fund sells Satpura 50 index variance at 16 and buys variance on its ten equal-weight constituents at 28. Realised comes in at 14 for the index and 30 for each stock. What correlation was implied, what was realised, and where did the P&L come from?Volatility tradingHardVolatility tradingExotics trading
  2. 038Tikona Credit Fund buys a five-year 9.2% bond of Mahuli Infra at 101 and swaps it to floating with a par asset swap. The five-year swap rate is 7.0% and the annuity factor 4.1. What is the asset swap spread, and what is the fund still exposed to?Interest rate derivativesHardCredit tradingRates derivatives
  3. 040Pranhita Capital is short a one-month at-the-money call on a Rs 1,000 stock at 25% volatility. Compare the hedging error from rehedging daily and weekly, and the cost at 0.05% of the traded value per rehedge. Which frequency would you choose?Greeks and managing an options bookHardVolatility tradingQuant trading
  4. 041Kalyangad Capital runs a delta-neutral short Satpura 50 options book with gamma of minus 2 units per point and vega of minus Rs 5 lakh per vol point, index at 22,000. Stress it for a 10% gap down with volatility up 10 points. Why does the Greek estimate understate the loss?Margin, clearing and risk limitsHardRisk managementClearing and risk
  5. 043Dayara Pharma trades at Rs 540 on a pending approval: Rs 660 if approved, Rs 420 if not, equally likely, with ordinary 25% volatility either way over a month. Price the one-month 600 call as a mixture of the two outcomes, compare it with a single-volatility price, and say what shape the event gives implied volatility across strikes.Option pricing and arbitrage checksHardVolatility tradingEquity derivatives
  6. 051A covered call overlay that added 2.1% a year in a ten-year backtest lost about 1.5% in its first live year. The backtest filled at mid, the live market was 2 vol points wide, volatility halved and one month rallied 8%. Where did the gap come from?Volatility tradingHardJump TradingChicago · 2018
  7. 052You are short Rs 5 lakh of one-month vega and can only hedge with three-month options. Size the hedge, then show what happens when one-month vol rises 4 points and three-month vol rises 2.Greeks and managing an options bookHardVolatility tradingExotics trading
  8. 057A client places USD 1 million for one month in a dual currency deposit paying 7% instead of 4.5%, spot 84.00, and the bank may repay in rupees at 84.50. Decompose it, price the extra yield, and show the client's position at 83.00 and 86.00.Structured products and client solutionsHardStructured productsPrivate banking
  9. 067An index options book has delta of plus 800 index units, gamma of minus 1.3 units per point and vega of minus Rs 3 lakh per vol point, with the index at 22,000. Build the P&L grid for index moves of minus 2%, 0 and plus 2% and volatility moves of minus 2, 0 and plus 2 points.Greeks and managing an options bookHardRisk managementEquity derivatives
  10. 070A stock joins the Satpura 50 and index funds must buy about Rs 900 crore at the close on the effective date, against average daily trading of Rs 150 crore. A facilitation desk can pre-position or offer the funds a guaranteed close. Size the liquidity problem and the desk's risk, and say what happens if the stock falls 4% after inclusion.Market making and trading scenariosHardMizuhoHong Kong · 2024MizuhoHong Kong · 2024MizuhoHong Kong · 2024

Company names and figures are illustrative.