1.

Unique Paper Code : 61017929

2. Course Name : BMS
3. Subject Name : FINANCIAL MODELING AND DERIVATIVES
4. Semester : VI
5. Time : 2 hrs
6. Max Marks : 75 Marks
7. Number of Question : Attempt any 4 out of six questions.

Instructions.
1. No negative Marking.
2. Use of non-programmable scientific calculator is permitted.
3. Accuracy upto 4 digits required.
4. Cumulative Standard Normal Distribution Table
a. https://www.studocu.com/en-us/document/brooklyn-college/introduction-to-economic-and-
business-statistics/other/cumulative-standard-normal-distribution-table/1269639/view
Q1. Explain the following : Forward rate agreements (FRA); Interest rate caps and floors; Compound
options; Asian options; Week stationarity; P-Value; ARMA; White test for heteroskedasticity; Durbin
Watson Test; variance inflation factor.
Q2. Calculate Put Gamma, Put Theta, create delta and gamma neutral portfolio from the following given
information.
◦ S (stock price) = 100
◦ X (strike price) = 100
◦ r (risk free rate) = 1.5% (daily volatility)
◦ σ (volatility) = 23%
◦ t (time to expiry) = 2 Months.
Q3. Calculate delta (One period), probability to increase stock price at one time period, probability to
decrease stock price at one time period, hedge ratio, call and put premium (One period and two period).
Further, create delta neutral portfolio in one period.
◦ S (stock price) = 100
◦ X (strike price) = 100
◦ Up factor = 1.2
◦ Down Factor = 0.8
◦ Rate of interest = 5%
Q4. Explain each one of the following criterion and make a pair wise differentiation among all criterion
as listed:
Akaike information criterion, Schwarz information criterion and Hannan-quinn information. criterion.

Q5. Given the model = Yt = β0 + β1X1 + εt

 Total Number of observations = 200
 R2 = 0.40
 Standard Error of model (SE) = 15
Calculate the following: Sum of squares of Regression; Total sum of squares; Mean Sum of squares of
Regression; Mean Sum of Residuals; F-Statistics of Model; Adjusted R2; t-Statistics of X1 variable;
Correlation between Yt and X1.
Q6. Explain following Graph/plots w.r.t assumptions of OLS.
12 Normal Q-Q Plot of Unstandardized Residual
Series: Residuals
A Sample 1 30
2

10
Observations 30 B
1
8 Mean -2.26E-11
Median -4996.066
Maximum 52566.57
6 0
Minimum -23094.66
Std. Dev. 14778.08
Expected Normal

4 Skewness 1.475471
Kurtosis 6.526034 -1

2
Jarque-Bera 26.42621
-2
Probability 0.000002
-40000 -20000 0 20000 40000 60000
0
-20000 0 20000 40000 Observed Value
 C D

E F