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 51–60 of 88 · filtered from 100Clear filters
  1. 056A one-year note pays twice the stock's rise up to 15%, so at most 30%, and loses one for one if the stock falls. Tabulate it against owning the stock for moves of minus 20%, 0, plus 10%, plus 15% and plus 40%.Structured products and client solutionsWarm upStructured productsWealth management
  2. 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
  3. 058A company with a Rs 300 crore floating loan at benchmark plus 1.5% buys a three-year 8% cap for 0.9% upfront. What does it pay each year if the benchmark runs at 7%, 9% or 10%?Interest rate derivativesCoreCorporate treasuryRates derivatives
  4. 059Five counterparties with exposures of Rs 40, 25, 60, 15 and 30 crore, default probabilities of 0.5%, 2%, 0.8%, 6% and 1.5%, and 60% loss given default except the fifth at 45%. Compute and rank expected loss, and say which limit you would cut first.Credit derivatives and counterparty riskCoreRisk managementCredit trading
  5. 060An Indian wire maker will buy 500 tonnes of copper in three months, priced in dollars. It hedges copper at USD 9,000 and dollars at 83.80. At delivery copper is 9,600 and USD/INR 85.10. Work the rupee cost hedged and unhedged, and split the difference.Hedging with futuresCoreCommodities tradingFX derivatives
  6. 061A bank at its Rs 500 crore limit to one borrower can buy five-year CDS protection on Rs 100 crore at 220 bp and lend Rs 100 crore more at a margin of 280 bp. What does the trade earn, and which risks does the bank still carry?Credit derivatives and counterparty riskCoreCredit tradingRisk management
  7. 062An exporter will receive USD 3 million in six months; the forward is 84.20. Compare the forward, a zero-cost collar of 82.50 and 85.50, and a seagull that also sells an 80.50 put to lift the cap to 86.50, at final rates of 79.00, 83.00 and 88.00.Currency derivatives and corporate FX hedgingCoreFX derivativesCorporate treasury
  8. 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
  9. 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
  10. 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

Company names and figures are illustrative.