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 1–9 of 9 · filtered from 100Clear filters
  1. 014USD/INR spot is 83.00, one-year rupee rates 7% and dollar rates 5%, and the one-year forward is quoted at 85.50. Is that consistent with covered interest parity, and if not, build the arbitrage for USD 10 million.Currency derivatives and corporate FX hedgingCoreFX derivativesRates derivatives
  2. 018A spice exporter receives USD 4 million and EUR 1.5 million in each of the next three quarters and calls after a sharp rupee fall. Build a 75%, 50%, 25% layered hedge with the given forwards, show the rupees locked, and say what you would and would not say about the rupee.Currency derivatives and corporate FX hedgingHardFX derivativesSell-side sales and trading
  3. 023An exporter sold USD 2 million forward at 83.60 for this week, but the buyer will pay a month late. Spot is 84.40 and one-month forward points are plus 0.25. Cancel and rebook: what is the cash flow today, and what effective rate is achieved?Currency derivatives and corporate FX hedgingCoreFX derivativesDerivatives operations
  4. 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
  5. 046Ilvani Software earns USD 50 million a year and spends USD 15 million in dollars. How much of its dollar exposure should it hedge, and how much does a one-rupee move change profit before and after hedging 60% of the net exposure?Currency derivatives and corporate FX hedgingCoreCorporate treasuryFX derivatives
  6. 048Nagzira Machine Tools must pay USD 2 million in six months. The six-month forward is 84.40; a six-month dollar call struck at 84.50 costs 0.90 rupee per dollar. Compare the forward and the option if the rate ends at 82.00, 84.50 or 87.00.Currency derivatives and corporate FX hedgingCoreFX derivativesCorporate treasury
  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. 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
  9. 097A power company borrows USD 100 million for five years at a floating dollar rate plus 1.8% and swaps it into a rupee fixed rate of 8.9%, with principal exchanged at 83.00. Lay out the cash flows, and compare the rupee cost of repaying principal unhedged if the rupee falls to 95.Currency derivatives and corporate FX hedgingHardFX derivativesCorporate treasury

Company names and figures are illustrative.