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Contents

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An Introduction to Indian
Derivatives Market
MEANING AND TYPES OF DERIVATIVES / S>o[ado{Q>ìg H$m AW© VWm àH$ma
Q.1. What are the different types of financial derivatives? Explain their features in
brief. [2018]
’$m¶Z|{e¶c S>o[ado{Q>ìg Ho$ {d{^ÝZ àH$ma Š¶m h¢? CZH$s {deofVmAm| H$mo g§jon ‘| g‘PmBE&
OR
Discuss various characteristics/features of future contracts. What is the role of
NP
clearing corporation in trading of such contracts?
^{dî¶ Ho$ H$m°ÝQ´>oŠQ>²g H$s {d{^ÝZ {deofVmAm|/JwUm| H$s MMm© H$s{OE& Eogo H$m°ÝQ´>oŠQ²>g Ho$ ì¶mnma ‘|
Šbr¶[a¨J H$m°nm}aoeZ H$s ^y{‘H$m Š¶m h¡? [2018]
OR
What are the features of a forward contract?
EH$ ’$m°adS>© H$m°ÝQ´>oŠQ> H$s {deofVmE± Š¶m h¢? [2017]
OR
What do you mean by Derivative instrument? How can one classify derivative
instruments? / S>o[ado{Q>d
BÝñQ¯>_|Q> go Amn Š`m g_PVo hmo? S>o[ado{Q>d BÝñQ¯>_|Q²>g H$m dJuH$aU
{H$g àH$ma {H$`m Om gH$Vm h¡? [2014]
OR
Discuss the concept of derivatives. What role do derivatives play in the finan-
cial world? [2009]
S>o[ado{Q>ìg H$s AdYmaUm H$s MMm© H$s{OE& ’$m¶Z|{e¶c dëS>© ‘| S>o[ado{Q>ìg Š¶m ^y{‘H$m {Z^mVo h¢?
OR
Explain the term derivatives mentioning their characteristics.
S>o[ado{Q>ìO eãX H$s ì`m»`m H$aVo hþE BgH$s {deofVm`| ~VmB`oŸ& [2004] 21

FEATURES OF DERIVATIVES MARKET / S>o[ado{Q>ìg ‘mH}$Q> Ho$ JwU

Q.2. Describe some of the characteristics of Financial Derivatives.
’$m¶Z|{e¶c S>o[ado{Q>ìg Ho$ Hw$N> JwUm| H$m dU©Z H$s{OE& [2004]
OR
BRILLIANT'S / Financial Derivatives and Risk Management / 4
 Explain some of the features of derivatives market in India.
^maV ‘| S>o[ado{Q>ìg ‘mH}$Q> Ho$ Hw$N> ’$sMg© H$mo g‘PmB¶o& 31

DERIVATIVE EXCHANGES OF INDIA / ^maV Ho$ S>o[ado{Q>d EŠgM|O

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Q.3. Discuss derivative exchanges of India. / ^maV Ho$ S>o[ado{Q>d EŠgM|O H$s MMm© H$s{OE& 32
ROLE OF SEBI IN REGULATING DERIVATIVE EXCHANGES
S>o[ado{Q>d EŠgM|Oog H$s aoJwcoqQ>J ‘| go~r H$s ^y{‘H$m
Q.4. Describe the role of SEBI in regulating derivative exchanges.
S>o[ado{Q>d EŠgM|Oog H$s aoJwcoqQ>J ‘| go~r H$s ^y{‘H$m H$m dU©Z H$s{OE&
OR
Write a short note on role of SEBI in regulating Indian Securities Market.
^maVr¶ {gŠ¶mo[aQ>rO ‘mH}$Q> H$s aoJwcoqQ>J ‘| go~r H$s ^y{‘H$m na EH$ g§{já {Q>ßnUr {cpIE& 34

DERIVATIVES TRADING MECHANISM / S>o[ado{Q>ìg Q´>oqS>J ‘¡Ho${ZÁ‘

Q.5. How are derivatives traded in India? / ^maV ‘| S>o[ado{Q>ìg H$m ì¶mnma H¡$go hmoVm h¡?
NP
OR
Explain the procedure of trading in derivatives.
S>o[ado{Q>ìg ‘| ì¶mnma H$aZo H$s à{H«$¶m g‘PmB¶o& 38

SPECULATION, HEDGING AND ARBITRAGING / ñnoHw$coeZ, hoqOJ VWm Am{~©Q´>oqJJ

Q.6. Explain the different categories of traders in the derivatives market.
S>o[ado{Q>ìg ‘mH}$Q> ‘| ì¶mnm[a¶m| H$s {d{^ÝZ H¡$Q>oJarO g‘PmB¶o& [2018]
OR
Differentiate between Hedger and Speculator in the derivative market.
S>o[ado{Q>d _mH}$Q> _| hoOa Am¡a ñnoŠ`yboQ>a Ho$ ~rM A§Va ~VmB`o& [2017]
OR
Discuss the activities of different type of traders in derivatives market.
S>o[ado{Q>ìg ‘mH}$Q> ‘| ì¶mnm[a¶m| Ho$ {d{^ÝZ àH$ma H$s J{V{d{Y¶m| H$s MMm© H$s{OE& [2014]
OR
Explain the role of Hedger, Arbitrageurs and Speculators in Derivative Market.
S>o[ado{Q>d _mH}$Q> _| hoOa, Am{~©Q´>oOa VWm ñnoŠ`yboQ>g© H$s ^y{_H$m H$s ì`m»`m H$s{O`oŸ& [2011]
OR
Write a short notes on: Hedgers, Speculators and Arbitrageurs.
hoOg©, ñnoŠ`yboQ>g© VWm Am{~©Q´>oOg© na g§{jßV {Q>ßnUr {b{I`oŸ& [2005]
OR
Discuss the types of traders in futures markets with suitable examples.
â`yMg© _mH}$Q> _| Q´>oS>g© Ho$ àH$mam| H$s MMm© Cn`wŠV CXmhaU Ûmam H$s{O`oŸ& 40

BRILLIANT'S / Financial Derivatives and Risk Management / 5

Q.7. Explain carefully the difference among Hedging, Speculation and Arbitrage.
hoqOJ, ñnoHw$coeZ VWm Am{~©Q´>oO Ho$ ~rM A§Va ñnîQ> ê$n go g‘PmB¶o& [2004] 45
INTRODUCTION TO FORWARD AND FUTURES MARKETS

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’$m°adS>© VWm â¶yMa ‘mH}$Q²>g H$m n[aM¶
Q.8. What are the features of a forward contract?
\$m°adS>© H$m°ÝQ´>oŠQ> H$s {deofVmE± Š`m h¢? [2017]
OR
What is forward market?/ \$m°adS>© _mH}$Q> go Amn Š`m g_PVo hmoŸ?
[2015]
OR
Forward contract is the contract of contingent claims. Why? What are the
advantages and disadvantages of such type of contracts?
\$m°adS>© H$m°ÝQ´>oŠQ> H$m°pÝQ>ÝO|Q> Šboåg H$m H$m°ÝQ´>oŠQ> h¡Ÿ& Š`m|? Bg àH$ma Ho$ H$m°ÝQ´>oŠQ²>g Ho$ bm^
d hm{Z Š`m h¢? [2012]
OR
What is the difference between a long forward position and a short forward
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position? / bm±J \$m°adS>© nmo{OeZ VWm em°Q>© \$m°adS>© nmo{OeZ Ho$ ~rM Š`m AÝVa h¡? [2004] 48
Q.9. How future contracts are helpful in minimizing the risk? Discuss.
â`yMa H$m°ÝQ´>oŠQ²>g {H$g àH$ma [añH$ H$mo H$_ H$aZo _| ghm`H$ h¢? MMm© H$s{OE& [2019, 2016]
OR
Differentiate between Commodity Future and Financial Futures.
H$_mo{S>Q>r â`yMa Am¡a \$m`Z|{e`b â`yMa Ho$ ~rM A§Va ~VmB`o& [2017]
OR
What is Future Contract? Explain its types.
â`yMa H$m°ÝQ´>oŠQ> Š`m h¡? BgHo$ àH$ma g_PmBE& [2016]
OR
Write a short note on mechanism of Futures.
â`yMg© Ho$ _¡Ho${ZÁ_ na g§{jßV {Q>ßnUr {b{I`oŸ& [2013]
OR
"Futures are Zero Sum Games." What do you think of is meant by this state-
ment?
""â`yMg© Oramo g_ Joåg hmoVo h¢''& Bg H$WZ go Amn Š`m g_PVo h¢? [2010]
OR
What are the most important aspects of the design of a new futures contract?
EH$ Z`o â`yMg© H$m°ÝQ´>oŠQ> H$s {S>OmBZ Ho$ AË`{YH$ _hËdnyU© nhby Š`m h¡? [2008]
OR
What are Futures Contracts? How can futures be used to hedge risk?
â`yMg© H$m°ÝQ´>oŠQ> Š`m h¢? hoO [añH$ Ho$ {b`o â`yMg© H$m Cn`moJ H¡$go {H$`m Om gH$Vm h¡? [2006] 52

BRILLIANT'S / Financial Derivatives and Risk Management / 6

 DIFFERENCE BETWEEN FORWARD AND FUTURES CONTRACTS
\$m°adS>© VWm â`yMg© H$m°ÝQ´>o³Q> Ho$ ~rM AÝVa
Q.10. Bring out the differences between future contract and forward contract.

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[2017]
â`yMa H$m°ÝQ´>oŠQ> Am¡a \$m°adS>© H$m°ÝQ´>oŠQ> Ho$ ~rM A§Va ñnï> H$s{OE&
OR
How forward market is different from future market? Discuss which is more
convenient and why? / \$m°adS>© _mH}$Q> â`yMa _mH}$Q> go {H$g àH$ma {^ÝZ h¡? ~VmBE BZ_|
go H$m¡Zgm _mH}$Q> A{YH$ gw{dYmOZH$ h¡ Am¡a Š`m|? [ 2015]
OR
Differentiate between Forward and Futures Derivatives.
\$m°adS>© VWm â`yMg© S>o[ado{Q>ìg Ho$ ~rM A§Va H$s{OEŸ& [2011]
OR
With the help of examples, explain the difference between Forward and
Futures.
\$m°adS>© VWm â`yMg© Ho$ ~rM AÝVa H$s ì`m»`m CXmhaU g{hV H$s{O`oŸ& [2009]
OR
NP
How does a Future Contract differ from a Forward Contract?
EH$ â`yMg© H$m°ÝQ´>oŠQ> EH$ \$m°adS>© H$m°ÝQ´>oŠQ> go {H$g àH$ma {^ÝZ h¡? [2006]
OR
Write a short note on: Comparison of Forward and Futures.
\$m°adS>© VWm â`yMg© H$s VwbZm na g§{jßV {Q>ßnUr {b{I`oŸ& [2006]
OR
Discuss the difference between Forward and Futures Contracts.
\$m°adS>© VWm â`yMg© H$m°ÝQ´>oŠQ> Ho$ ~rM AÝVa H$s MMm© H$s{O`oŸ& [2002]
OR
"Futures contracts are like forward contracts which are reconstructed daily."
Comment. /""â`yMg© H$m°ÝQ´>oŠQ²>g ^r \$m°adS>© H$m°ÝQ´>oŠQ> H$s Vah hmoVo h¢ Omo à{V{XZ [aH$ÝñQ´>ŠQ>
hmoVo h¢Ÿ&'' {Q>ßnUr H$s{O`oŸ& 58

HEDGING THROUGH FORWARD CONTRACTS / ’$m°adS>© H$m°ÝQ´>oŠQ²>g Ûmam hoqOJ

Q.11. How forward contracts are helpful in minimizing the risk? Discuss.
\$m°adS>© H$m°ÝQ´>oŠQ> {H$g àH$ma [añH$ H$mo H$_ H$aZo _| ghm`H$ h¢? MMm© H$s{OE& [2019, 2016]
OR
How are forward contracts used for hedging? Explain with example.
hoqOJ Ho$ {cE ’$m°adS>© H$m°ÝQ´>oŠQ²>g H¡$go Cn¶moJ {H$¶o OmVo h¢? CXmhaU g{hV g‘PmB¶o& 60
Review Questions 61

BRILLIANT'S / Financial Derivatives and Risk Management / 7

 An Overview of Risk
Management

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INVESTORS AND RISK MANAGEMENT - RISKS IN BANKING
B§doñQ>g© VWm [añH$ ‘¡ZoO‘|Q> - ~¢qH$J ‘| OmopI‘
Q.12. What are the different risks associated in banking business? What are the
reasons for those risks?
~¢qH$J ì¶mnma go Ow‹S>o hþE {d{^ÝZ OmopI‘ Š¶m h¢? CZ OmopI‘m| Ho$ H$maU Š¶m h¢? [2020]
OR
Explain the concept of risk and its types. Further explain the process of risk
management. / [añH$ H$s AdYmaUm VWm BgHo$ àH$ma g_PmBE& [añH$ _¡ZoO_|Q> H$s à{H«$`m ^r
g_PmBE& [2017]
OR
Explain the concept of risk and discuss the procedure of risk management.
NP
[2016]
[añH$ H$s AdYmaUm g_PmBE VWm [añH$ _¡ZoO_|Q> H$s à{H«$`m na MMm© H$s{OE&
OR
Discuss the various financial risk and how it can be minimized with risk
management tools.
{d{^ÝZ \$m`Z|{e`b [añH$ VWm BÝh| H$_ H$aZo Ho$ [añH$ _¡ZoO_|Q> Qy>ëg ~VmBEŸ& [2015]
OR
Discuss the concept of using derivatives for Risk Management.
[añH$ _¡ZoO_oÝQ> Ho$ {c`o S>o[ado{Q>ìO Ho$ Cn`moJ H$s AdYmaUm> na MMm© H$s{O`oŸ& [2013]
OR
State briefly the risk management process.
[añH$ _¡ZoO_oÝQ> àmogog H$mo g§jon _| g_PmBEŸ& [2012]
OR
Describe the various types of Financial Risk, Risk Management process and
also differentiate the credit risk and market risk in terms of financial contract.
{d{^ÝZ àH$ma Ho$ \$m`Z|{e`c [añH$, [añH$ _¡ZoO_oÝQ> àmogog H$m dU©Z H$s{O`o VWm \$m`Z|{e`c
H$m°ÝQ´>oŠQ> Ho$ g§X^© _| H«o${S>Q> [añH$ VWm _mH}$Q> [añH$ Ho$ ~rM AÝVa ñnï> H$s{O`oŸ& [2011]
OR
Discuss the risk management strategies.
[añH$ _¡ZoO_oÝQ> ñQ´>oQ>o{Og H$s MMm© H$s{O`oŸ& [2007] 63

RISK MANAGEMENT PROCESS - RISK MODELS / [añH$ ‘¡ZoO‘|Q> àmogog - [añH$ ‘m°S>ëg
Q.13. Describe the process of risk management. / [añH$ ‘¡ZoO‘|Q> H$s àmogog H$m dU©Z H$s{OE& 75

BRILLIANT'S / Financial Derivatives and Risk Management / 8

Q.14. What are the different ways by which risk can be managed?
{d{^ÝZ VarH|$ Š¶m h¢ {OZHo$ Ûmam OmopI‘ H$mo ‘¡ZoO {H$¶m Om gH$Vm h¡?
OR
Write a short note on: Managing Risk. / ‘¡ZoqOJ [añH$ na EH$ g§{jßV {Q>ßnUr {b{IE&

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OR
Describe derivative as a strategy for risk management.
[añH$ ‘¡ZoO‘|Q> Ho$ {cE EH$ ñQ´>oQ>oOr Ho$ ê$n ‘| S>o[ado{Q>d H$m dU©Z H$s{OE& 76
CREATING VALUE WITH RISK MANAGEMENT - FINANCIAL DISTRESS AND IN-
VESTMENT / [añH$ ‘¡ZoO‘|Q> Ho$ gmW ‘yë¶ {Z‘m©U - ’$m¶Z|{e¶c {S>ñQ´>og VWm B§doñQ>‘|Q>
Q.15. Discuss Financial Distress and Investment.
{dÎmr` g§H$Q> VWm {Zdoe H$s MMm© H$s{O`oŸ& [2017, 2011]
OR
Discuss the Financial Distress.
\$m`Z|{e`b {S>ñQ´>og ({dÎmr` g§H$Q>) na MMm© H$s{OE& [2012] 79

Review Questions 82
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Future Contracts
MECHANISM OF FUTURE CONTRACT (FUTURE CONTRACT AND FUTURE TRADING)
â¶yMa H$m°ÝQ´>o³Q> H$m ‘¡Ho${ZÁ‘ (â¶yMa H$m°ÝQ´>o³Q> VWm â¶yMa Q´>oqS>J)
Q.16. Forward contracts are associated with various risks. How future contracts over-
come problems associated with forward contracts? /â¶yMa H$m°ÝQ´>³
o Q> {d{^ÝZ Omo{I‘m|
go Ow‹S>o hmoVo h¢& ’$m°adS>© H$m°ÝQ´>o³Q> go Ow‹S>r g‘ñ¶mAm| H$mo â¶yMa H$m°ÝQ´>o³Q> H¡$go Xÿa H$aVo h¢? [2020]
OR
Write a short note on: Mechanism of Future
EH$ g§{jßV {Q>ßnUr {b{IE… ‘¡Ho${ZÁ‘ Am°’$ â¶yMa [2013]
OR
Discuss the mechanism of future with example.
CXmhaU Ho$ gmW ‘¡Ho${ZÁ‘ Am°’$ â¶yMa na MMm© H$s{OE& [2012]
OR
What are future contracts? / â¶yMa H$m°ÝQ´>o³Q> ³¶m h¡? [2006]
OR
Explain the mechanism of Future Trading.
â¶yMa Q´>oqS>J Ho$ ‘¡Ho${ZÁ‘ H$mo g‘PmBE& [2004] 83

BRILLIANT'S / Financial Derivatives and Risk Management / 9

 NEWSPAPER QUOTES / ݶyOnona H$moQ²>g
Q.17. Write a short note on Newspaper Quotes
ݶyOnona H$moQ²>g na EH$ g§{já {Q>ßnUr {cpIE& 88

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HEDGING USING FUTURES / â¶yMg© H$m Cn¶moJ H$aHo$ hoqOJ
Q.18. How future contracts helpful in minimizing the risk?
OmopI‘ H$mo ݶyZV‘ H$aZo ‘| â¶yMa H$m°ÝQ´>oŠQ²>g H¡¡$go ghm¶H$ h¢? [2019]
OR
How does a derivative help to eliminate uncertainty regarding future price of
assets traded? / ì¶mnma {H$¶o J¶o AgoQ²>g H$s â¶yMa àmBg Ho$ g§~§Y ‘| A{ZpíMVVm H$mo Xÿa H$aZo
‘| EH$ S>o[ado{Q>d H¡$go ghm¶Vm H$aVm h¡? [2017]
OR
Write short note on: Hedging as Risk Minimization Tool.
g§{jßV {Q>ßnUr {b{IE… [añH$ {_{Z_mBOoeZ Qy>b Ho$ ê$n _| [añH$& [2016]
OR
NP
Discuss the concept of Perfect Hedging. What are the different types of risk
involved in hedging using future contract? How can one make hedge perfect?
Give examples.
na\o$ŠQ> hoqOJ H$s AdYmaUm na MMm© H$s{OEŸ& â`yMa H$m°ÝQ´>oŠQ> _| Cn`moJ H$s OmZo dmbr hoqOJ _|
em{_b [añH$ Ho$ {d{^ÝZ àH$ma H$m¡Z go h¢? na\o$ŠQ> hoqOJ {H$g àH$ma go H$s Om gH$Vr h¡Ÿ&
CXmhaU Xr{OEŸ& [2014] 91

Q.19. Write short note on "Over-the-Counter Exchanges."

"Amoda-X-H$mCÝQ>a EŠgM|Oog" na g§{jßV {Q>ßnUr {b{IEŸ& [2019, 2018, 2015] 94
Q.20. An Airline Executive has argued “There is no point in using oil futures. There
is just as much chance that the price of oil in the future will be less than
futures price as there is that it will be greater than the price.” Discuss the
executive’s viewpoint.
EH$ E`abmBZ EŠOrŠ`y{Q>d VH©$ XoVm h¡ {H$ ""Am°Bb â`yMg© Ho$ Cn`moJ H$m H$moB© AW© Zht h¡Ÿ&
^{dî` _| Am°Bb H$s dmñV{dH$ àmBg, â`yMg© àmBg H$s VwbZm _| H$_ hmoZo H$s g§^mdZm CVZr hr
h¡ {OVZr H$s A{YH$ hmoZo H$s h¡Ÿ&'' EŠOrŠ`y{Q>d Ho$ ÑpîQ>H$moU H$s ì`m»`m H$s{O`oŸ& [2010] 98
INDEX FUTURES/BASICS OF STOCK INDEX FUTURE
B§S>oŠg â¶yMg©/ñQ>m°H$ B§S>oŠg â¶yMa H$s àmW{‘H$ ~mV|
Q.21. Write short note: Basics of Stock Index Future.
g§{jßV {Q>ßnUr {b{IE… ñQ>m°H$ BÝS>o³g Ho$ ~o{g³g& [2019, 2016]
OR

BRILLIANT'S / Financial Derivatives and Risk Management / 10

 "Stock index futures are an inexpensive and highly liquid short-term alterna-
tive to speculate the stock market." Comment. / ''ñQ>m°H$ B§S>oŠg â¶yMg© ñQ>m°H$ ‘mH}$Q>
H$m AZw‘mZ cJmZo Ho$ {cE EH$ gñVo VWm A˶{YH$ {c{¹$S> {dH$ën h¢&'' {Q>ßnUr Xr{OE& [2018]
OR

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What is stock index future?
ñQ>m°H$ BÝS>oŠg â`yMa Š`m h¡? [2012]
OR
Write a short note on Index Futures.
BÝS>oŠg â`yMg© na EH$ g§{jßV {Q>ßnUr {b{I`oŸ& [2011]
OR
What is Stock Index Futures? How can risk be hedged under stock index
futures? [2007]
ñQ>m°H$ BÝS>oŠg â`yMg© Š`m h¡? ñQ>m°H$ BÝS>Šo g â`yMg© Ho$ AÝVJ©V [añH$ H$mo H¡$go hoO {H$`m OmVm h¡?
OR
How does Stock Index Future work? Explain with illustrations.
ñQ>m°H$ BÝS>oŠg â`yMg© H¡$go H$m`© H$aVm h¡? CXmhaU g{hV ì`m»`m H$s{O`oŸ& [2004]
NP
OR
Explain how do an Index Future operates? What are its advantages and
disadvantages? [2002]
EH$ BÝS>oŠg â`yMg© H¡$go Am°naoQ> H$aVm h¡, ì`m»`m H$s{O`oŸ& BgHo$ bm^ VWm hm{Z`m§ Š`m h¢? 98

INTEREST RATE FUTURES / B§Q>aoñQ> aoQ> â¶yMg©

Q.22. Write a short note on Interest Rate Futures.
B§Q>aoñQ> aoQ> â¶yMg© na EH$ g§{já {Q>ßnUr {cpIE&
OR
What is Interest Rate Futures? Explain some of its features.
B§Q>aoñQ> aoQ> â¶yMg© Š¶m h¡? BgHo$ Hw$N> JwUm| H$mo g‘PmB¶o& 103

FOREIGN EXCHANGE AND CURRENCY FUTURE

’$m°aoZ EŠgM|O VWm H$a§gr â¶yMa
Q.23. Write a short note on Currency Futures.
H$a§gr â¶yMg© na EH$ g§{já {Q>ßnUr {cpIE& 106

OPERATIONS OF MARGIN / ‘m{O©Z Ho$ Am°naoe§g

Q.24. Explain with the help of example the concept of marking to market.
‘mH}$Q> H$s ‘m{Hª$J H$s AdYmaUm H$mo CXmhaU H$s ghm¶Vm go g‘PmBE& [2009]
OR

BRILLIANT'S / Financial Derivatives and Risk Management / 11

 Explain how margins protect traders against the possibility of default?
{S>\$m°ëQ> H$s g§^mdZm Ho$ {dnarV _m{O©Z Q´>oS>g© H$mo H¡$go àmoQ>oŠQ> H$aVo h¢, ì`m»`m H$s{O`oŸ& [2004]
OR
What is the difference between the operation of the margin accounts

P
administrated by a clearing house and those administered by a broker?
EH$ Šbr`[a¨J hmCg Ûmam g§Mm{bV _m{O©Z AH$mCÝQ²>g VWm Omo EH$ ~«moH$g© Ûmam g§Mm{bV hmoVo h¢
CZHo$ Am°naoeZ Ho$ ~rM Š`m AÝVa h¡? 109

CONVERGENCE CLEARING PROCESS / H§$dO}§Ýg Šbr¶[a¨J àmogog

Q.25. Write a short note on convergence clearing process.
H§$dO}§Ýg Šbr¶[a¨J àmogog na EH$ g§{já {Q>ßnUr {cpIE& [2018]
OR
Write short notes on "Convergence of Spot and Future Price."
"ñnm°Q> VWm â`yMa àmBg Ho$ H$ÝdO}Ýg" na g§{jßV {Q>ßnUr {b{IEŸ& [2014]
OR
Explain Convergence of Futures and Spot Price in futures market.
NP
â`yMg© _mH}$Q> _| â`yMg© VWm ñnm°Q> àmBg Ho$ H$ÝdO}Ýg H$s ì`m»`m H$s{O`Ÿ& [2009]
OR
Discuss the concept of Convergence of Futures and Spot Prices.
â`yMg© VWm ñnm°Q> àmBgog Ho$ H$ÝdO}Ýg Ho$ H$ÝgoßQ> H$s MMm© H$s{O`oŸ& [2009] 113

SPOT-FUTURES ARBITRAGE / ñnm°Q>-â¶yMg© Am{~©Q´>oO

Q.26. Show that if the futures price of a commodity is greater than the spot price
during the delivery period, then there is an arbitrage opportunity. Does an
arbitrage opportunity exist if the futures price is less than the spot price? Ex-
plain your answer.
`{X {S>{bdar H$s Ad{Y Ho$ Xm¡amZ EH$ H$_mo{S>Q>r H$s â`yMg© àmBg, ñnm°Q> àmBg go A{YH$ hmo Vmo
Xem©B`o {H$ Bg_| EH$ Am{~©Q´>oO Anm°À`y©{ZQ>r hmoVr h¡Ÿ& `{X â`yMg© àmBgog ñnm°Q> àmBgog go H$_ hmo
Vmo Š`m Am{~©Q´>oO Anm°À`y©{ZQ>r hmoVr h¡? AnZo CÎma H$s ì`m»`m H$s{OEŸ& [2010] 115
CLEARING HOUSE AND CLEARING MARGINS
³br¶[a¨J hmCg VWm ³br¶[a¨J ‘m{O©Z
Q.27. Explain the role of clearing house. Also explain the term clearing margin.
Šbr¶[a¨J hmCg H$s ^y{‘H$m g‘PmB¶o& Šbr¶[a¨J ‘m{O©Z eãX H$mo ^r g‘PmB¶o& 117

Solved Practical Questions 116

Review Questions 135

BRILLIANT'S / Financial Derivatives and Risk Management / 12

 Option Market

P
MEANING, TYPES, USES OF OPTIONS AND PAY OFFS FROM OPTIONS
Am°ßeÝg H$m AW©, àH$ma VWm Cn`moJ, Am°ßeÝg go no-Am°âg
Q.28. What is Option Market? / Am°ßeZ _mH}$Q> Š`m h¡? [2016]
OR
Call option acts like an insurance policy. How?
H$m°b Am°ßeZ EH$ B§í`moa|g nm°{bgr H$s Vah H$m_ H$aVm h¡Ÿ& H¡$go? [2014]
OR
Write a short note on: Types of Options.
Am°ßeÝg Ho$ àH$mam| na g§{já {Q>ßnUr {c{IEŸ& [2013]
OR
Discuss: Over the counter exchange options.
NP
Amoda X H$mCÝQ>a EŠgMoÝO Am°ßeÝg H$s MMm© H$s{OEŸ& [2012]
OR
Discuss the following terms with the help of examples.
{ZåZ{b{IV H$mo CXmhaU g{hV g_PmBE:
(i) Naked call option / Zo³S> H$m°b Am°ßeZ
(ii) Naked put option / Zo³S> nwQ> Am°ßeZ
(iii) Put option in the money / nwQ> Am°ßeZ BZ ‘Zr
(iv) Call option in the money / H$m°b Am°ßeZ BZ ‘Zr
(v) Put option out of money / nwQ> Am°ßeZ AmCQ> Am°’$ ‘Zr
(vi) Call option out of money / H$m°b Am°ßeZ AmCQ> Am°’$ ‘Zr [2009]
OR
Distinguish between call option and put option. [2007]
H$m°c Am°ßeZ VWm nwQ> Am°ßeZ Ho$ ~rM AÝVa g_PmBEŸ&
OR
Define option. Discuss types of options.
Am°ßeZ H$mo n[a^m{fV H$s{OEŸ& Am°ßeÝg Ho$ àH$mam| H$s MMm© H$s{OEŸ& [2006]
OR
What is an Option? How is it different from other derivatives?
EH$ Am°ßeZ Š`m hmoVm h¡? `h Xygao S>o[ado{Q>ìg go {H$g àH$ma {^ÝZ hmoVm h¡? [2005] 137

BRILLIANT'S / Financial Derivatives and Risk Management / 13

Q.29. Differentiate Futures contract and Option contract.
â¶yMg© H$m°ÝQ´>oŠQ> VWm Am°ßeZ H$m°ÝQ´>oŠQ> ‘| A§Va ~VmB¶o& [2019]
OR
How can you differentiate Futures from Options?

P
Amn Am°ßeÝg go â`yMg© H$mo {H$g àH$ma {^Þ _mZ gH$Vo h¢? [2016]
OR
As an investor analyse the factors that favour using options instead of Futures and
Vice Versa with suitable example.
EH$ BÝdoñQ>a Ho$ ê$n _| CXmhaU g{hV CZ \¡$ŠQ>g© H$mo EZmbmBO H$s{OE Omo â`yMg© Ho$ ~Om` Am°ßeÝg
Ho$ nj _| hmo VWm Am°ßeÝg Ho$ ~Om` â`yMg© Ho$ nj _| hmoŸ& [2013] 150

OPTIONS VALUATION AND PRICING / Am°ße§g d¡ë¶yEeZ VWm àmBqgJ

Q.30. Discuss with example how will you calculate the premium of insurance factor
of the call option. / CXmhaU g{hV MMm© H$s{OE {H$ Amn H$m°c Am°ßeZ Ho$ B§í¶moa|g ’¡$ŠQ>a H$s
àr{‘¶‘ H$s JUZm H¡$go H$a|Jo? [2014]
OR
NP
Briefly explain the concept of option valuation. [2013]
Am°ßeZ d¡ë`yEeZ H$s AdYmaUm H$s g§{já _| ì`m»`m H$s{OEŸ&
OR
What do you understand by Intrinsic Value and Time Value of option contract?
Am°ßeZ H$m°ÝQ´>oŠQ> H$s BpÝQ´>pÝgH$ d¡ë`y VWm Q>mB_ d¡ë`y go Amn Š`m g_PVo h¢?
OR
Why do you think that Time Value is the maximum for ATM (At-The-Money)
options? / Amn Eogm Š`m| gmoMVo h¢ {H$ ATM (EQ> X _Zr) Am°ßeZ Ho$ {c`o Q>mB_ d¡ë`y _¡pŠO__
(A{YH$V_) hmoVr h¡? 152
FACTORS DETERMINING OPTION PRICES
Am°ßeZ àmBgog H$mo {ZYm©[aV H$aZo dmco \¡$ŠQ>g©
Q.31. What are the various factors which affect the price of a European call option?
Discuss. / {d{^ÝZ H$maH$ Š¶m h¢ Omo EH$ ¶yamo{n¶Z H$m°c Am°ßeZ H$s àmBg H$mo à^m{dV H$aVo h¢?
MMm© H$s{OE& [2020]
OR
What are the different factors that critically determine the value of options
highlighting any problem in a formal evaluation model?
{d{^ÝZ H$maH$ Š¶m h¢ Omo EH$ ’$m°‘©c Bd¡ë¶yEeZ ‘m°S>c ‘| {H$gr g‘ñ¶m H$mo aoIm§{H$V H$aZo Ho$
Am°ße§g H$s d¡ë¶y H$m AmcmoMZmË‘H$ ê$n go {ZYm©aU H$aVo h¢? [2019]
OR

BRILLIANT'S / Financial Derivatives and Risk Management / 14

 Critically appraise the factors which determine the theoretical value of op-
tions highlighting any problems that might be encountered in incorporating
them in a formal evaluation model. / AmcmoMZmË‘H$ ê$n go CZ H$maH$m| H$s àe§gm H$s{OE
Omo {H$gr g‘ñ¶m H$mo aoIm§{H$V H$aZo Ho$ Am°ße§g Ho$ ϶mo[a{Q>H$c d¡ë¶y H$m {ZYm©aU H$aVo h¢ Omo EH$

P
’$m°‘©c Bd¡ë¶yEeZ ‘m°S>c ‘| CÝh| gpå‘{cV H$aZo ‘| gm‘Zo Am gH$Vo h¢? [2018] 155
TRADING STRATEGIES/CONSTRUCTION OF OPTION STRATEGIES IN VARIOUS
MARKET SITUATIONS AND THEIR PAY OFF / {d{^ÝZ ~mOma n[apñW{V¶m| ‘| Am°ßeZ
ñQ´>oQ>oOrg H$s Q´>oqS>J ñQ´>oQ>oOrg/H§$ñQ´>ŠeZ VWm CZHo$ no Am°’$
Q.32. Which is better to buy a call option on a stock or to buy a stock? Give reasons
with pay off. / Š¶m AÀN>m h¡ EH$ ñQ>m°H$ na EH$ H$m°c Am°ßeZ IarXZm ¶m EH$ ñQ>m°H$ IarXZm?
no Am°’$ Ho$ gmW H$maU ~VmB¶o& [2020]
OR
Explain various strategies of Trading Involving Options.
Q´>oqS>J BÝdm°pëd¨J Am°ßeÝg H$s {d{^Þ ñQ´>oQ>oOrg ~VmB`o& [2017]
OR
NP
What are the different trading strategies in option market? Discuss.
Am°ßeZ _mH}$Q> _| {d{^Þ Q´>oqS>J ñQ>o´Q>oOrg Š`m h¢? g_PmBE& [2016]
OR
Discuss the various option strategies.
{d{^ÝZ Am°ßeZ ñQ´>oQ>oOrg na MMm© H$s{OEŸ& [2015] 159

Q.33. How will you prove that the present value of difference between the premium
of call and put options on the same stock with same time to expiry is always
equal to the difference between the future price of the same stock with same
time to expiry and exercise price of the options?
Amn `h H¡$go gË`m{nV H$a|Jo {H$ {H$gr EH$ hr ñQ>m°H$ Ho$ EŠgnm`ar Ho$ g_mZ g_` dmco H$m°c Ed§
nwQ> Am°ßeZ H$s àr{_`_ Ho$ _Ü` AÝVa H$m dV©_mZ _yë` h_oem EH$ g_mZ EŠgnm`ar dmco g_mZ
ñQ>m°H$ H$s â`yMa àmBg VWm Am°ßeÝg H$s EŠgagmBO àmBg Ho$ _Ü` Ho$ ~am~a hmoVm h¡Ÿ& [2012] 191

BLACK SCHOLES MODEL / ãboH$ ñH$moëg _m°S>b

Q.34. Write short note on "Black Scholes Model."
"ãboH$ ñH$moëg _m°S>b" na g§{jßV {Q>ßnUr H$s{OEŸ& [2015]
OR
Discuss the Black Scholes Model. / ãboH$ ñH$moëg _m°S>b na MMm© H$s{OEŸ& [2012, 2006]
OR
Explain the meaning and calculation of Option Pricing.
Am°ßeÝg àmBqgJ Ho$ AW© VWm JUZm H$mo g_PmBEŸ& [2011] 202

BRILLIANT'S / Financial Derivatives and Risk Management / 15

 CONCEPT OF DELTA, THETA, GAMMA AND VEGA
S>oëQ>m, WrQ>m, Jm‘m VWm doJm H$s AdYmaUm
Q.35. Write short note on: Delta hedging./ S>oëQ>m ho{O§J na g§{jßV {Q>ßnUr {b{IEŸ& [2014]

P
OR
Discuss the delta hedging./ S>oëQ>m ho{O§J na MMm© H$s{OEŸ& [2012]
OR
What do you understand by Delta of an Option? Describe its behaviour with
respect to spot price and time to maturity. How is it measured for call and put
options?
{H$gr Am°ßeZ Ho$ S>oëQ>m go Amn Š`m g_PVo h¢? ñnm°Q> àmBg VWm _¡À`mo[aQ>r Ho$ g_` Ho$ g§X^©
BgHo$ ì`dhma H$s ì`m»`m H$s{OEŸ& H$m°c VWm nwQ> Am°ßeÝg Ho$ {c`o Bgo H¡$go _mnm OmVm h¡?
OR
How do you find the delta of a portfolio? What is delta neutrality and delta
hedging? Describe with the help of an example. / EH$ nmoQ>©\$mo{c`mo Ho$ {c`o Amn S>oëQ>m
H¡$go kmV H$a|Jo? S>oëQ>m Ý`yQ´>o{cQ>r VWm S>oëQ>m hoqOJ Š`m h¡? CXmhaU XoH$a g_PmBEŸ& 210
NP
Q.36. What does it mean to assert that the delta of a call option is 0.7? How can a
short position in 1,000 options be made delta neutral when the delta of each
option is 0.7?
Bg H$WZ H$m Š`m AW© h¡ {H$ EH$ H$m°c Am°ßeZ H$m S>oëQ>m 0.7 h¡? 1,000 Am°ßeÝg _| EH$ em°Q>©
nmo{OeZ S>oëQ>m H$mo Ý`yQ´>c H¡$go ~Zm gH$Vr h¡ O~ àË`oH$ Am°ßeZ H$m S>oëQ>m 0.7 hmoVm h¡? 214

Q.37. Define Theta. How it is calculated? Discuss the variations of theta of a

European call option with the stock price and time-to-maturity.
WrQ>m H$mo n[a^m{fV H$s{OEŸ& BgH$s JUZm H¡$go H$s OmVr h¡? ñQ>m°H$ àmBg VWm Q>mB_ Qy>-
_¡À`mo[aQ>r Ho$ gmW EH$ `yamo{n`Z H$m°c Am°ßeZ Ho$ WrQ>m Ho$ do[aEeZ H$s MMm© H$s{OEŸ&
OR
What is Gamma of an option and why it's study is important?
Am°ßeZ H$m Jm_m Š`m hmoVm h¡ VWm BgH$s ñQ>S>r Š`m| _hËdnyU© hmoVr h¡?
OR
What is Gamma Nutrality? What major problem would you face in trying to
achieve gamma neutrality? / Jm_m Ý`yQ´>m{cQ>r Š`m h¡? Jm_m Ý`yQ´>m{cQ>r àmá H$aZo _| {H$g
_w»` g_ñ`m H$m gm_Zm H$aZm n‹S>Vm h¡? 215

EXCHANGE TRADED OPTION / EŠgM|O Q´>oS>oS> Am°ßeZ

Q.38. How do you create put call parity? What are the advantages of this relation-
ship? / Amn nwQ> H$m°c n¡[aQ>r H¡$go ~Zm¶|Jo? Bg g§~§Y Ho$ cm^ Š¶m h¢? [2020]
OR

BRILLIANT'S / Financial Derivatives and Risk Management / 16

 Write a short note on "Currency Options."
"H$a§gr Am°ßeÝg" na g§{jßV {Q>ßnUr {b{IEŸ& [2015]
OR
Write a note on Put-call parity./ nwQ>-H$m°c n¡[aQ>r na g§{já {Q>ßnUr {c{IEŸ& [2011] 217

P
Q.39. Give difference between (a) Long Call and Short Put; (b) Long Put and Short
Call. [2020]
{ZåZ{cpIV Ho$ ~rM A§Va ~VmB¶o: (a) cm§J H$m°c VWm em°Q>© nwQ> (b) cm§J nwQ> VWm em°Q>© H$m°c 222

Solved Practical Questions 161

Review Questions 243

Swaps
Q.40. What is Swaps?/ ñdon Š`m h¡? [2015, 2013]
NP
OR
What are Swaps? How do they contribute in hedging?
ñdon Š`m h¢? do hoqOJ _| Š`m ^y{_H$m {Z^mVo h¢? [2009]
OR
Explain the Concept of Swaps./ ñdon Ho$ H$ÝgoßQ> H$s ì`m»`m H$s{O`oŸ& 245

Q.41. What is Currency Swap? Explain the use of Currency Swap to transform
liabilities and assets. [2017]
H$a§gr ñd¡n Š`m h¡? AgoQ²>g Am¡a bm`{~{bQ>rO Q´>m§g\$m°_© H$aZo _| H$a§gr ñd¡n H$m Cn`moJ ~VmB`o&
OR
Define Commodity Swaps and Equity Swaps. How do they differ to each other?
Explain. / H$_mo{S>Q>r ñd¡ßg VWm BpŠdQ>r ñd¡ßg H$mo n[a^m{fV H$s{OE& `o {H$g àH$ma EH$ Xÿgao go
{^ÝZ h¢? g_PmB`o& [2016]
OR
What is Currency Swap? Differentiate Currency Swap and Interest Rate Swap.
H$a§gr ñd¡n Š`m h¡? H$a§gr ñd¡n Am¡a B§Q>aoñQ> aoQ> ñd¡n Ho$ ~rM A§Va ~VmB`o& [2016]
OR
Write short note: Commodity SWAPS.
g§{jßV {Q>ßnUr {b{IE… H$_mo{S>Q>r ñd¡ßg& [2016]
OR
How interest rates are swap? Discuss the procedure of interest rate swapping.
BÝQ>aoñQ> aoQ²>g {H$g àH$ma ñdon hmoVo h¢? BÝQ>aoñQ> aoQ> ñdoqnJ H$s à{H«$`m ~VmBEŸ& [2015] 249

BRILLIANT'S / Financial Derivatives and Risk Management / 17

 PRICING AND VALUATION OF SWAPS / ñd¡ßg H$s àmBqgJ VWm d¡ë¶yEeZ
Q.42. Explain how you would value a swap that is the exchange of a floating rate in
one currency for a fixed rate in another currency? / ì¶m»¶m H$s{O¶o {H$ Amn EH$ ñdon

P
H$m ‘yë¶m§H$Z {H$g àH$ma H$a|Jo {Oggo {H$ EH$ H$aÝgr H$s âbmoqQ>J aoQ> Xÿgar H$aÝgr H$s {’$³ñS> aoQ>
Ho$ {bE E³gM|O hmo gHo$? [2010, 2009] 262

CREDIT DEFAULT SWAPS / H«o${S>Q> {S>’$m°ëQ> ñd¡ßg

Q.43. Which is more dangerous, default to a bank or default associated in swap?
[2020]
H$m¡Z A{YH$ IVaZmH$ h¡, EH$ ~¢H$ go {S>’$m°ëQ> ¶m ñd¡n ‘| g§~§{YV {S>’$m°ëQ>?
OR
What is a credit default swap? What are the features of a credit default swap?
Discuss.
H«o${S>Q> {S>’$m°ëQ> ñd¡n Š¶m h¡? EH$ H«o${S>Q> {S>’$m°ëQ> ñd¡n Ho$ JwU Š¶m h¢? MMm© H$s{OE& [2018]
OR
Write short note on: Credit Default Swaps.
NP
H«o${S>Q> {S>\$m°ëQ> ñdon na g§{jßV {Q>ßnUr {c{IEŸ& [2013] 264

Q.44. How does bank use swaps to meet out its ALM requirements?
~¢H$ BgH$s ALM Amdí¶H$VmAm| H$mo nyam H$aZo Ho$ {cE ñd¡ßg H$m Cn¶moJ H¡$go H$aVo h¢? [2020]
OR
How does the swap contract can be responsible to manage asset and liability
of the bank? Explain with example. / {H$gr ~¢H$ Ho$ AgoQ> VWm cm`{~{cQ>r H$mo _¡ZoO
H$aZo Ho$ {cE EH$ ñdon H$m°ÝQ´>oŠQ> {H$g àH$ma CÎmaXm`r hmo gH$Vm h¡? CXmhaU g{hV ì`m»`m
H$s{OEŸ& [2012] 267

Solved Practical Questions 255

Review Questions 277

 Appendix 279

 T-20 Questions 291



BRILLIANT'S / Financial Derivatives and Risk Management / 18