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CA Tarun Mahajan: CA Final Strategic Financial Management, Paper 2, Chapter 5
CA Tarun Mahajan: CA Final Strategic Financial Management, Paper 2, Chapter 5
CA Tarun Mahajan
Derivatives
Forwards
Futures basic
Futures
Derivatives
Options
Swaps
It is a contract to buy/sell on a
specified future date, at a
predetermined rate.
If you want to buy 125 shares of SBI in May end, then you can long 1
lot (lot size 125) of SBI today at a price of 2290. Now even if price
rises, you will have to pay only Rs.2290 per share.
If stock futures are not available then
one can hedge through index futures also.
But it will hedge market related risk only, not
the total risk.
Index position = stock position x stock beta.
Example: if you have 10000 shares of
ONGC. Current price = Rs.330; Beta = 0.80.
Here you can short Nifty futures of 10000 x
330 x 0.80 = Rs.26,40,000.
Next month Nifty future is available at 5855 and lot
size is 50 hence one lot will be worth 2,92,750.
Now if Index falls by 10% then there will be profit in index future of
Rs.430x50x465= 1cr.
Net 0 22 22
The share of X Ltd. is currently selling for
Rs.300. Risk free interest rate is 0.8% per
month. A three months futures contract is
selling for Rs. 312.