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INTERNAL EXAMINATION
ACADEMIC YEAR: 2022-2023
SUBJECT: Financial Derivatives DATE: 30/11/2022
SUBJECT CODE: 4539222 TOTAL MARKS: 30
TIME: 90MINS
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1) What do you understand by risk? What are the different ways of classifying and managing
them? (7)
OR
Explain the concept of financial derivatives. Explain the types of Derivatives.
OR
3) Mr. X is Investing in 15000 shares of ABC Ltd. At the 11 months forward contract value of Rs.
1650 each. Assumed risk free rate of interest is 9% compounded continuously. ABC Ltd is paying
dividend of 180 Rs. Per share after 3 months, 6 months and 9 months. What would be price of
forward contract?
4) tata motors exports cars to Japan , and every three months, it receives EUR 700,000 from car
shipments. On March 1, the exchange rate between the Indian rupee and euro is EUR 1 = INR
80.72. the euro interest rate is 6% per annum, while the interest rate in India is 9% per annum.
Hyundai wants to hedge its euro receipt through forward contracts for the next 6 months. The
180-days forward rate is EUR 1 = 81.56. (GTU-2019)
(1) What type of hedging strategy could be suitable for Hyundai?
(2) Calculate the 90 days and 180 days theoretical forward rate.
(3) Identify whether there is any arbitrage opportunity.
(4) If there is an arbitrage opportunity, calculate the arbitrage profit for EUR 500,000.
2) type of risk
3) swaptions