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 61–70 of 88 · filtered from 100Clear filters
  1. 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
  2. 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
  3. 068A desk holds 400 lots, lot 50, of index calls with delta 0.45, gamma 0.0002 per point and vega Rs 12 per vol point per unit, index at 22,000. Express delta in index units and rupees, gamma as the change in rupee delta for a 1% move, and vega in rupees per vol point.Greeks and managing an options bookWarm upRisk managementIndian derivatives desks
  4. 069An exporter has sold USD 20 million forward at an average of 83.10. Forwards for the same dates are now 85.00, and the board sees a mark-to-market loss. Compute it, and explain why it is not the whole story.Currency derivatives and corporate FX hedgingWarm upCorporate treasuryFX derivatives
  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. 074A stock at Rs 1,200 reports results tomorrow, and the at-the-money straddle expiring in a week costs Rs 84. Its last eight results-day moves were 5%, 3%, 9%, 4%, 6%, 2%, 7% and 4%. Buy the straddle, sell it, or sell an iron fly with wings at 1,100 and 1,300 for Rs 60?Option strategies and trade ideasHardVolatility tradingEquity derivatives
  7. 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
  8. 076A client is long 50 lots of calls with delta 0.30, short 20 lots of puts with delta minus 0.40 and long 10 lots of futures. What is the net delta, and how many futures make the book flat?Greeks and managing an options bookWarm upIndian brokingEquity derivatives
  9. 077Devkund Textiles closed at 500, 505, 498, 502, 510, 506, 499, 503, 508, 504 and 507 over eleven days. What is its realised volatility, and how does it compare with 30% implied?Volatility tradingWarm upVolatility trading
  10. 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

Company names and figures are illustrative.