Beruflich Dokumente
Kultur Dokumente
(FINAL EXAMINATION)
Program: MMS–2nd Year Sem.:III Sub: Derivatives and Risk Management Max. Marks: 60
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Instructions:
1. Question No. 1 is Compulsory and carry 20 marks
2. Attempt any FOUR from Q.No.2 to Q.No.6. Each question for 10 marks
3. Each question has a sub question (A, B, etc.) and respective marks assigned for sub questions.
4. Label the Answers properly, for example, Question 1, answer [1. A, 1. B, etc].
5. Restrict your answers to only 2 decimals.
6. The usage of stock and exchange name is for examination purpose only.
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Q.1. [20 MARKS]
Peter Dias, a proficient trader in stock market, analysis the derivative data very closely before taking
any kind of position in the future & option segment. He understands the benefit of leveraging in the
derivative segment, but is equally calculative while evaluating his risk. He is analysing some of the data
for TCS stock which he is willing to take a fresh position (long or short) based on the data below for
Table 1.2 & 1.3. He also has some of the existing positions open in the future segment given below in
Table 1.1.
Existing Open Positions: (Table 1.1)
No. of Entry Initial
Stock Position Lot Size CMP
Lots Price Margin Paid
INDUSINDBK Buy 1 500 1800 1810 18%
DABUR Buy 1 2000 400 375 25%
HEXAWARE Short 2 1000 650 647 30%
MARUTI Buy 2 150 7500 7560 20%
Derivative Indicators of TCS stock: (Table 1.2)
Future Change Change
Date Basis OI Future IV HV PCR OI
Price Price % OI %
01-Oct-18 2,260 3.0% 4.0 72,86,000 3.5% 32.8 30.3 1.08
03-Oct-18 2,175 -3.7% 12.3 80,03,500 9.9% 33.1 35.3 1.19
04-Oct-18 2,076 -4.6% 10.9 82,14,000 2.6% 39.7 40.5 0.88
05-Oct-18 2,113 1.8% 10.7 83,27,000 1.4% 38.5 40.2 0.85
08-Oct-18 2,089 -1.2% 11.4 82,47,000 -1.0% 45.5 39.4 0.83
09-Oct-18 2,099 0.5% 6.9 83,86,000 1.7% 45.6 38.3 0.85
10-Oct-18 2,044 -2.6% 0.8 89,14,500 6.3% 51.9 38.7 0.72
11-Oct-18 1,988 -2.8% 7.9 91,33,000 2.5% 52.1 40.4 0.59
12-Oct-18 1,922 -3.3% 4.1 1,00,31,500 9.8% 45.2 41.8 0.40
15-Oct-18 1,952 1.5% 2.2 99,51,000 -0.8% 40.2 41.3 0.40
A. State the objective of different types of market participants – Speculator, Hedger & Arbitrageur?
(3 marks)
A. What are the factors which affect the option pricing? Show the change in the option premium for Call &
Put option if each of the factors were decreased. (6 marks)
B. Calculate the Payoff Table for the following strategy for different expiry levels.
Short Future @ 1190
Long 1200 CE @ 54
Sell 1300 CE @ 12
Calculate the payoff for the above strategy, if the stock expires at 1080, 1315, 1420 & 1220. (4 marks)
A. Mr. Strange created a Long Combo strategy by Buying ATM 1950 strike CE option @ 47 and Selling ATM
1950 strike PE option @ 44. The spot price and future price are trading at par at 1950 currently.
Calculate the Net Delta for this strategy if the underlying price moved from 1950 to 1951 in few
minutes after executing the Long Combo strategy. (4 marks)
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B. Mr. Hulk wants to understand the impact on the price of 1920 CE option, if next day the volatility of the
stock increased from 14% to 15.50% and price remaining constant. Calculate the net change in the
option price. (2 marks)
C. Calculate the Net Delta change for Mr. Loki for his position in OTM 1980 strike CE option, if the
underlying price moved higher from 1950 to 1952 on the next day. (2 marks)
D. Calculate the change in the option premium for Mr. Ultron for his short position in 1880 strike CE
option, if next day the spot price moved from 1955 to 1956 and the volatility reduced from 15% to 14%.
(2 marks)
Q.5. [10 MARKS]
A. Seagull, an MNC hedge fund in India wants to exit (sell) PACF stock from its portfolio. They are holding
1,50,000 shares for the same. The quantity freeze for this stock is 72,000 shares. The below are the best
five Bid-Ask prices trading at SNE exchange. Calculate the Impact Cost. (6 marks)
NSE
Bid Rates Ask Rates
Shares Price Price Shares
38000 620.05 620.55 35000
55000 619.90 620.75 68000
17000 619.50 621.05 72000
38000 619.05 621.60 108000
74000 618.70 621.95 28000
B. The below is the rollover details of last three months for Telecom sector stocks.
Price Rollovers Qty (OI in crore)
Stock
Jul Aug Sep Jul Aug Sep
BHARTIARTL 357.35 385.25 359.05 4.74 4.76 4.81
IDEA 57.25 50.35 38.80 13.34 15.27 17.49
INFRATEL 288.30 285.25 270.35 0.66 0.65 0.41
TATACOMM 570.00 564.50 508.10 0.32 0.36 0.40
a. Seeing the individual stocks rollover with price change, what is your overall view on the sector?
(3 marks)
b. Calculate the total base of rollover OI for the sector towards the start of the October series?
(1 mark)
Q.6. [10 MARKS]
A. Explain the difference between a Protective Put and Covered Call option strategies. Based on the
strategy construction, comment in what scenario you will be comfortable to deploy these strategies.
(6 marks)
B. Match the column: (4 marks)
a. Beta 1. Liquidity Risk
b. VaR 2. Systematic Risk
c. Improper 3. Unsystematic Risk
Execution
d. Assignment Margin 4. Probability of loss, based on historical price trends and volatility
e. Initial Margin 5. Operational Risk
f. Wide Bid-Ask 6. Buyer of Future
spread
g. Risk can be reduced 7. Buyer of an Option
through
diversification
h. Limited Risk 8. Writer of an Option
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