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 71–80 of 100
  1. 071After selling calls to a client, your desk must buy 2 lakh shares to hedge delta. Mid is 500.5 and the offers are 20,000 at 501, 40,000 at 502, 60,000 at 503 and 80,000 at 505. What are the average fill and the slippage if you sweep the book, and what else could you do?Market making and trading scenariosCoreTower Research CapitalNew York · 2020
  2. 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
  3. 073A market maker quotes a stock's 500 call at 12.00 bid, 12.40 offered, lot 100. Over the day it buys 600 contracts on the bid and sells 400 on the offer; the option's delta is 0.5. What spread did it earn, what inventory is left, and how does it hedge it?Market making and trading scenariosWarm upSusquehanna International GroupBala Cynwyd · 2025
  4. 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
  5. 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
  6. 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
  7. 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
  8. 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
  9. 079Build a two-step binomial tree for a stock at 500 with up 1.1, down 0.9 and 2% a step, and price a 520 put as European and as American. Where is early exercise optimal?Option pricing and arbitrage checksHardModel validation
  10. 080A stock halts at 300 on a takeover rumour with a bid of 360 in the air. You are short 500 lots of one-month 320 calls. How do you quote at the reopen, and what do you stand to lose or make?Market making and trading scenariosHardOld Mission CapitalChicago · 2020

Company names and figures are illustrative.