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 1–10 of 10 · filtered from 100Clear filters
  1. 025An options desk is short gamma of 8,000 shares per rupee on a Rs 400 stock, delta hedged, when news gaps it 8% to Rs 432. Implied volatility jumps from 30% to 38% and vega is minus Rs 1.5 lakh a point. Estimate the loss, the new delta, and what you do in the next ten minutes.Greeks and managing an options bookHardMarket makingEquity derivatives
  2. 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
  3. 049At 10 am on expiry day, Baitarani Capital is short 200 lots (lot 50) of the Satpura 50 22,000 straddle, sold for 60 points, with the index at 22,000. What is the P&L at settlement if the index ends at 21,900, 22,000 or 22,150, and how does gamma behave through the day?Greeks and managing an options bookCoreIndian derivatives desksRisk management
  4. 052You are short Rs 5 lakh of one-month vega and can only hedge with three-month options. Size the hedge, then show what happens when one-month vol rises 4 points and three-month vol rises 2.Greeks and managing an options bookHardVolatility tradingExotics trading
  5. 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
  6. 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
  7. 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
  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. 090A fund holds 1,000 lots of six-month at-the-money calls on a stock at 500 when the company announces a surprise special dividend of Rs 25, payable in two months. With delta 0.55, estimate the loss, and explain why put holders gain.Greeks and managing an options bookCoreEquity derivativesHedge funds
  10. 094A fund is long an at-the-money straddle position with gamma of 1,500 shares per rupee and theta of Rs 45,000 a day, rehedged at each close. Closes run 800, 812, 805, 790, 798, 801. Estimate each day's P&L and the week's.Greeks and managing an options bookCoreVolatility tradingEquity derivatives

Company names and figures are illustrative.