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 1–8 of 8 · filtered from 100Clear filters
  1. 009A fund is short one-month and one-year index straddles, each with vega of Rs 1 crore per point. A 5% one-day fall lifts one-month volatility 12 points and one-year 4. Which loses more, and what else hits the one-month?Volatility tradingCoreVolatility tradingMacro trading
  2. 028A fund sells Satpura 50 index variance at 16 and buys variance on its ten equal-weight constituents at 28. Realised comes in at 14 for the index and 30 for each stock. What correlation was implied, what was realised, and where did the P&L come from?Volatility tradingHardVolatility tradingExotics trading
  3. 034A long volatility book made Rs 12 lakh yesterday. At the open it had delta of plus 2,000, gamma of 150 per point, vega of Rs 3 lakh per point and theta of minus Rs 4 lakh a day. The index rose 60 points and implied volatility 1.5 points. Explain the P&L and size what is unexplained.Volatility tradingCoreRisk managementVolatility trading
  4. 042Agasthya Capital buys a variance swap with vega notional of Rs 10 lakh at a strike of 20. What is the variance notional, what is the P&L if realised volatility is 24, and if it is 16? Why is the payoff not symmetric?Volatility tradingCoreVolatility tradingExotics trading
  5. 047Painganga Capital sold a one-month at-the-money straddle on Torna Logistics at 22% implied volatility, vega Rs 2 lakh per vol point, delta hedged daily. Realised volatility was 18%. Estimate the P&L, and describe a path that would have made the trade lose even so.Volatility tradingCoreVolatility tradingHedge funds
  6. 051A covered call overlay that added 2.1% a year in a ten-year backtest lost about 1.5% in its first live year. The backtest filled at mid, the live market was 2 vol points wide, volatility halved and one month rallied 8%. Where did the gap come from?Volatility tradingHardJump TradingChicago · 2018
  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. 087A stock reports results in five trading days. The one-week option trades at 60% implied volatility against 30% on a normal day. What move is priced for results day, and would you sell the one-week straddle or a calendar against the one-month at 38%?Volatility tradingHardVolatility tradingEquity derivatives

Company names and figures are illustrative.