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 88 · filtered from 100Clear filters
  1. 035Kolahoi Pharma is at Rs 1,500 and pays a Rs 30 dividend in two months. The six-month future trades at Rs 1,510 with rates at 6.5% continuous. What is fair value, which way does the arbitrage run, and what does the trade need that is not always there?Forwards, futures and arbitrageCoreEquity derivativesMarket making
  2. 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
  3. 037Six months ago a fund agreed to buy 10,000 shares of Kabini Cables at Rs 520 in one year. The stock is now Rs 560, six months remain and the rate is 7% continuous. What is the forward worth today, and to whom?Forwards, futures and arbitrageWarm upEquity derivativesDerivatives operations
  4. 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
  5. 039Purna Finance bought a 3x6 FRA at 7.00% on Rs 50 crore. At fixing the three-month rate is 7.60%. How much is settled, when, and who pays whom?Interest rate derivativesWarm upRates derivativesCorporate treasury
  6. 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
  7. 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
  8. 042Agasthya Capital buys a variance swap with vega notional of Rs 10 lakh at a strike of 20. What is the variance notional, what is the P&L if realised volatility is 24, and if it is 16? Why is the payoff not symmetric?Volatility tradingCoreVolatility tradingExotics trading
  9. 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
  10. 044Vairatgad Market Makers quotes one-month options on Chandoli Paper. An at-the-money option has vega of Rs 1.2 per vol point per share, fair volatility is uncertain by about 0.8 points, and hedging costs about Rs 0.10 a share. What is a minimum sensible bid-offer width, and what would make you widen it?Market making and trading scenariosCoreMarket makingVolatility trading

Company names and figures are illustrative.