TYFM DERIVATIVE MARKETS QUESTION BANK and Paper Pattern (2010)

(Prepared by Sujata khadilkar, Department of Economics, S.K.Somaiya

College)

Module 1: Nature of financial derivatives (Reference nos. 1 & 2)

1. What is a derivative? Explain the characteristics of a derivative.

(07)

2. Describe the features of and illustrate various types of derivative

instruments. (15)

3. Elucidate the structure or participants in the derivative market.

(08)

4. Examine the rationale for the emergence of derivatives or the need/benefit/

(07)

significance of derivatives.

5. Write a note on derivative markets in India or Write a note on futures and

options (08)

products in India

6. Distinguish between: (04

marks each)

a. Forwards and Futures

b. Futures and Options

c. Forwards and Options.

Module 2: Principles of trading and hedging in index futures (Reference no. 1 & 3)

1. Give precise meaning of the following terms: (02 marks

each)

a. Spot and future price

b. Contract cycle and contract specifications

c. Expiry and settlement date, settlement cycle & price

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 d. Types of orders

2. Trading strategies with respect to index futures including both short and long

position.
(08 marks)

3. Hedging and arbitrage strategies in futures.

(07 marks)

Module 3: Principles of trading and hedging with options (Reference nos. 3& 4)

1. Give precise meaning of the following terms: (02 marks

each)

a. Call and Put option

b. American and European option

c. Option premium, strike price, instrinsic value

d. ATM, OTM, ITM.

2. What do the Greeks delta, gamma, theta and Vega represent? How are
they measured? (15
marks)

3. Discuss and illustrate the strategies for trading in options. (08

marks)

Module 4: Risk management systems and procedures (Reference nos. 5 & 6)

1. Discuss the various types of risks.

(08 marks)

2. Write a note on Value at Risk (VaR).

(07 marks)

3. Write a note on clearing & settlement mechanism by NSCCL or functions of

NSCCL. (07 marks)

4. Elaborate on the risk management measures taken by NSCCL (with respect to

categorization of stocks, VaR, extreme loss & mark to market margins,

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 capping & release of margins, margins for institutional deals)
(15 marks)

5. Briefly explain the different types of margins levied in futures and options
segment: (08 marks)

a. Initial margin, b. exposure margin, c. premium margin, d. assignment

margin

References:

1. Financial Markets- Natarajan & Gordon

2. Financial institutions and markets- L.M.Bhole

3. Indian financial system- Bharti Pathak

4. Derivatives- John Hull & S and Derivatives- John Hull

5. Financial management: theory & Practice- Prasanna Chandra

6. www.bseindia.com & www.nseindia.com, Clearing & settlement systems,

types of orders, risk management measures by NCCSL and understanding
margins

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Paper Pattern for derivative markets

All questions are compulsory.

Internal options may be given.

Q. 1 a & b or Q.1 a & b 08 & 07 marks for each sub-question

Q.2. a & b or Q.2. a & b 08 & 07 marks for each sub-question

Q.3. a & b or Q.3. a & b 08 & 07 marks for each sub-question

Q.4. a & b or Q.4. a & b 08 & 07 marks for each sub-question

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