Financial Derivatives:

(Topics for the Group Project)

1. The derivatives are useful when they are used on certain pricing principles. Explain with detail
examples the three main objectives of Derivatives i.e. price discovery, hedging and speculation.

2. Describe different valuation methods of forward contracts and future contracts with suitable
examples. How the credit risk in futures can be overcome.

3. Prepare a report differentiating stock index features and currency features and explain suitable
hedging strategies through futures contract..

4. Make out a case for Forward Rate Agreement (FRA) in India. How does a Bank hedge its
international transactions through FRA, explain with suitable examples.

5. Explain the process and strategies of taking advantages of interest rate swaps and currency
swaps. Structure a deal showing the gains to the various participants.

6. Prepare a report on commodities market in India? How it is helpful in price discovery? Does
your Group agree that commodity market causes inflation in the economy.

7 It is said that there exists a relationship between prices of Call and Put which is known as
Put Call parity. Enumerate this concept under various situations giving suitable examples.

8 Explain the concept of Binomial option pricing model. How this model is used in valuation
of pricing under different scenarios.

9. Explain with suitable examples the Black-Scholes Model for option pricing. Describe
different changes in the model while valuing dividend paying stock, indices and currencies.

10. The options can be used to obtain desired returns and risk profiles with various
combinations. Elaborate this using straddle, strangle and spreads.