Fixed Rate | Floating Rate Company X | 10.0% Six-month LIBOR+0.3% ‘Company Y | 11.2% Six-month LIBOR+1.0% QS. Answer any two A, MBA-406F3/520 Show the transaction without intermediary and with intermediary. (72-14) Bring out the historical development of financial derivatives. “Stock index futures are the derivative instruments which are used by large portfolio managers for hedging their risks.” Explain the statement in the light of features of stock index futures, Consider one year call and put option on a stock E> Rs, 1020 are traded in the market place. The stock price is Rs. 1000, Risk free interest rate is 6% per annum compounded annually at the end of the year the stock can go up by 20% and come down by 10%, Find out the value of call and put using Bio-nominal model. wees MBA-406F3 Even 481 Semester Examination - 2017 MBA (IV SEMESTER) FINANCIAL DERIVATIVES Time: 03:00 Hours Note: Attempt QL. Answer any four A MBA-406F3/520 Max Marks : 70 all questions, each question carry equal marks. (4835-14) What is option contract? Explain the different classifications of options contract. What is backwardation and how backwardation differs from contango. What are various specifications of the future contract? Explain with some hypothetical specification. Difference between hedging, speculation and arbitrage in the context of financial derivatives. ‘Mr. X enters into a short gold futures contract when the future price Rs. 60 per ounce. Contract size is 60,000 ounce. How much the Mr. X gain or lose if price at the end of the contract is: (a) 58.2 per ounce (b) 61.3 per ounce. 1Q2. Answer any four A E. QB. Answer any two A MBA-406F3/520 (4*3.5=14) Explain the concept of option in context to: i, In-the-money ii, At- the- money iii, Of the- money What do you mean by Binomial pricing model? What are the different assumption of Binomial Pricing Model? FRA are priced according to the principle of prevention of arbitrage, explain the statement with example. Distinguish between forward contracts and futures contracts with suitable example. Consider a six-month long forward contract of a non-income-paying security. The risk free rate of interest is 6 per annum. The stock price is Rs. 30 and the delivery price is Rs. 28, Compute the value of forward contract. (2*7=14) Explain the marking- to- market term used in futures trading and its mechanism .with suitable examples. Q4. Answer any two A. MBA-406F3/520 How cash and carry arbitrage is used to determine the theoretical price of forward contract explain with example? Suppose you bought put option on a stock at a strike price of Rs. 500 for a premium of Rs. 60. What would be your pay-off and profit on maturity if on the date of maturity. Case 1 : Share price= Rs.590 Case 2: Share price = Rs. 430 Also construct the payoff diagram, (2*7=14) Explain the importance of future markets in context to economic growth of @ country. Explain the role of SEBI in derivative market in India Company X and Y both wish to borrow Rs. 10 crore for 5 years. Company Y wants to arrange a floating rate loan, The rate is six-month LIBOR. Company Y wants to arrange a fixed rate loan, ‘They have been offered the following terms: _ 3MBA-406 (F3) 345 Printed Pages : 3 Paper Code & Roll No. to be filled in your Answer Book Roll No. MBA (IV - Sem.) Even Semester Examination - 2016 FINANCIAL DERIVATIVES [Time : 3 Hours] [Maximum Marks :70] Note: Attempt all questions. 1, Attempt all parts : (3.5x4=14) (@) Financial Swap (b) Forward Contract (©) Speculative Derivatives @ Convertible Securities and warrants 2. Attemptany four: (3.5x4=14) (@) Types of margin in future market (6) Clearing house (©) Arbitrageurs MBA-406 (F3)/580 a) [PTO]