Question Bank TY-BFM(Sem 5) Derivatives Market 1) Define Derivatives. What are the types of Derivatives?

What are the types of Generic Derivatives? 2)a. Differentiate between Forward Contracts and Future Contracts b. Differentiate between different participants in the market. 3)Explain the following terms: Contract Size, Contract Multiplier, Tick Size, Open Interest, Volume, Initial Margin, Mark to Market Margin, SPAN. 4)What are the effects of the following on the Call and P u t Options : a. Cash Price of the asset b. Strike Price c. Volatility of the underlying Price. d. Time to Expiration e. Interest Rate. 5)a. What is Hedging? Explain different types of H e d g i n g u s e d i n the Market . b. Write a Note on Arbitrage. Explain different types of Arbitrage. 6)a ) W h a t i s O p t i o n s ? W h a t a r e t h e t y p e s o f O p t i o n s ? E x p l a i n with the help of Pay off charts for all positions possible in the market. 1

b) Draw comparisons between Futures and Options. 7)What do you mean by Synthetic Positions? What is the p u r p o s e of creating Synthetic Positions? Explain with the help of Examples. 8 ) a . E x p l a i n t h e p r o c e s s o f c r e a t i n g S y n t h e t i c S h o r t p u t Positions. b. Explain the process of creating Synthetic Long Call Positons.9 ) A trader goes long on 5 lots of Tata Steel CA with s t r i k e p r i c e of Rs.500/- @ Rs. 5/-. The CMP of Tata Steel is Rs.495. One Lot size of Tata Steel is 1000. What are the different payoff of the trader at the following levels of the share: a . 4 8 0 b . 4 9 5

c . 5 0 0 d . 5 2 0 e . 5 4 0 1 0 ) A t r a d e r h a s a p o s i t i o n o f 1 00 0 s h a r e s o f R e li a n c e . T h e traderi s o f t h e o p i n i o n t h a t d u e t o t h e m a r k e t c o n d i t i o n s t h e r e i s a temporary down fall in the share price but in the long term the price will go up. The trader wants to hedge is position for the down fall e x p e c t e d i n t h e p o r t f o l i o v a l u e . H e e x p e c t s t h e s h a r e p r i c e t o g o up to Rs.950. CMP of the share is Rs.1020. Guide him what should he do.1 1 ) G i v e a d e t a i l e d a n a l y s i s o f V e r t i c a l B u l l i s h S p r e a d s w i t h t h e help of an example using puts. 2

12)You expect a very substantial move in t h e m a r k e t . T h e direction of which is unknown to you. How do you trade explain with the help of an example. If you have an view in the market about a direction what changes will you make in the trades.1 3 ) S o l v e t h e f o l l o w i n g : C a l l p r e m i u m P u t p r e m i u m ShareCurrentpriceStrikeprice3 m o n t h s 6 months3months6 monthsA 5 2 5 0 3 4 0 . 3 5 1 . 0 5 B 4 0 4 5 1 1 . 2 5 5 . 5 0 6 . 0 0 C 3 5 3 0 6 6 . 3 0 0 . 4 5 0 . 6 5 1.If you purchase one 3 month call contract on A , w h a t p r o f i t o r loss will you make on maturity if the price of A at that time is Rs. 57/-2 . I f B s p r i c e i s R s . 3 5 o n m a t u r i t y o f t h e 6 m o n t h o p t i o n , determine the value of

five 6 month put contracts at their maturity date3 . I f y o u had purchased five 3-month call options of C a n d t h e p r i c e of C is Rs. 32 on maturity, determine your profit or loss on the investment4 . I f y o u h a d p u r c h a s e d f i v e 3 - m o n t h p u t s o n C , w h a t w o u l d b e y o u r profit or loss on maturity if the share price was Rs.32/-5 . I f y o u r c l i e n t w r o t e f i v e 6 m o n t h c a l l o p t i o n s o n B s s h a r e , w h a t i s his profit or loss on maturity if price of B at that time is Rs. 43/6.If your client wrote five 6m o n t h p u t o p t i o n s o n B , w h a t w o u l d h i s profit or loss be on maturity if share price then was Rs. 43/1 4 ) a . E x p l a i n t h e c o n c e p t s o f Pr o t e c t e d P u t b. What is a Covered Call1 5 ) a . W h a t i s P r o t e c t e d C a l l ? E x p l a i n b. What is a Reverse Collar? 16) What is Covered Put? Explain Collar. 3

Question Bank TY-BFM(Sem 5) 17)Explain the strategy of Condor. What is the difference betweenCondor and Butterfly.1 8 ) E x p l a i n t h e s t r a t e g y o f Strip and Strap in detail. 19) Explain the Option Greeks a . D e l t a b . G a m m a c . V e g a d.Lambda 20) Chintan is on the view that Bajaj Auto has a given a positionbreak out at current market price of Rs.2010/- but he also believest h a t t h e p r i c e s h a l l o n l y g o u p t o 2 0 4 0 . N o t b e y o n d t h a t w h i c h option. Spread can he use, and prepare a table to show pay off atprice levels of 1980, 2010, 2040, 2070, 2010. 1 m o n t h 2 0 1 0 c a l l 1 5 1 m o n t h 1 month 2050 call 51 month 1980 call 35 21) Explain the basis and concept of future pricing with thehelp of an example.Calculate future prices from the following?

Spot Price= 5,410 Time for expiration= 30 daysInterest rate = 12% p.a 22) Explain the exercise and Assignment Process. Also show theexercise settlementcomputation.2 3 ) E x p l a i n t h e c o m p r e h e n s i v e R i s k m a n a g e m e n t M e c h a n i s m s adopted by NSCCL. 4 Question Bank TY-BFM(Sem 5) 24) What are the different types of margins25) Expalin the accounting process of futures26) Expalin the accounting procees of options Foreign Exchange Markets 1)Important terms and concepts a)Direct quotesb)Indirect quotesc)American quotesd)European quotese)Bid/offer r a t e f ) A s k / s e l l r a t e g)Vehicle currencyh ) S p o t transactioni)Forward transactions j ) C r o s s r a t e s k)Correspondent banksl ) N o n - d e l i v e r a b l e f o r w a r d 2)Difference between direct and indirect rates?3)What are nostro, vostro and loro accounts? 5

Question Bank TY-BFM(Sem 5) 4) What is triangular arbitrage? Explain with the h e l p o f a n example?5)Explain in brief gold exchange standards? 6) Explain Bretton woods system?7)What is triffine paradox? 8) Explain in brief Smithsonian agreement 9) What is fixed exchange rate system? Give the case f o r a n d against fixed exchange rate system1 0 ) W h a t i s f l o a t i n g e x c h a n g e r a t e s y s t e m ? g i v e t h e c a s e f o r a n d against floating exchange rate system1 1 ) W h a t i s c r a w l i n g p e g a n d a d j u s t a b l e p e g s y s t e m1 2 ) W h a t i s t h e e x c h a n g e r a t e me c h a n i s m in India1 3 ) S h o r t n o t e - C H I P S 1 4 ) S h o r t n o t e -

C H A P S 1 5 ) S h o r t n o t e r i s k e l e me n t i n f o r e i g n e x c h a n g e ma r ke t s 1 6 ) Ne e d a n d i mp o r t a n c e o f f o r e i g n e x c h a n g e ma n a g e me n t 1 7 ) W h a t a r e t h e v a r i o u s m e t h o d s a d o p t e d f o r f o r e i g n e x c h a n g e management1 8 ) W h a t i s t h e i mp a c t o f L PG o n I n d i a s f o r e i g n e x c h a n g e ma r ke t and inbound and outbound investment1 9 ) W h a t i s t h e r o l e o f R B I i n d i r e c t i n g a n d c o n t r o l l i n g f o r e x market in India 6 TY-BFM Question Bank