Reg. No.

________

Karunya University
(Karunya Institute of Technology and Sciences)
(Declared as Deemed to be University under Sec.3 of the UGC Act, 1956)

M.B.A. Trimester Examination April/May 2010

Subject Title: OPTIONS, FUTURES AND DERIVATIVES Time: 3 hours Subject Code: 09MS383 Maximum Marks: 100

Answer ALL questions (5 x 20 = 100 Marks)

1. a. b. Describe about the functions of derivatives market. (10) Explain about the characteristics of derivatives and its types. (10) (OR) Discuss in detail about the different types of options. (10) Explain about players in option market. (10) Explain about the Binomial model of option valuation. (10) Discuss about the factors determining option prices. (10) (OR) Explain about different option trading terminologies. (10) Describe about option straddle strategy. (10) Explain about the features of forward contract. (10) Explain about the role of clearing house in the market for futures. (10) (OR) What do you mean by spreads in futures trading? Explain the same. (10) Explain about covered calls and protective puts hedging strategies. (10)

2.

a. b.

3.

a. b.

4.

a. b.

5.

a. b.

6.

a. b.

7.

Compulsory: Explain about Normal backwardation and Contango theory of future prices vs expected spot prices.

8.

a. b.

9.

a. b.

Explain about interest-rate swap. (10) What are the benefits of currency swap? (10) (OR) Explain about interest rate futures. (10) Discuss about various types of currency swap. (10)

Reg. No. ________

Karunya University
(Karunya Institute of Technology and Sciences)
(Declared as Deemed to be University under Sec.3 of the UGC Act, 1956)

M.B.A. Trimester Examination January 2010

Subject Title: OPTIONS, FUTURES AND DERIVATIVES Time : 3 hours Subject Code: 09MS383 Maximum Marks: 100

Answer ALL questions (5 x 20 = 100 Marks)

1. Compulsory: a. An investor buys a European call option to purchase 100 IBM shares. The following information is given: Strike Price = Rs. 40 Current Stock Price = Rs. 55 Price of an option to buy one share = Rs. 5 The expiration date of the option is 4 months. What is the net gain? (5) b. An investor buys a European put option to sell 100 Exxon shares with a strike price of $ 70. The current share price is $ 65, the expiration date of the option is three months and the price of an option to sell one share is $ 7. The initial investment is $ 700. What is the net gain? (5) c. Suppose that the term structure of interest rates is flat in both Japan and the United states. The Japanese rate is 4 percent per annum and the American rate is 9 percent per annum (both with continuous compounding). A financial institution has entered into a currency swap where it receives 5 percent per annum in Yen and pays 8 percent per annum in dollars once a year. The principals in the two currencies are $10 million and 1200 million Yen. The swap will last for another three years and the current exchange rate is 110 yen = $ 1. Calculate the value of the swap. (1 0) 2. 3. Discuss the history of Derivatives Market in India. (OR) Options are fundamentally different from forward and futures contracts. Discuss bringing out the different types of options and option positions. Distinguish between a strangle and a straddle by giving appropriate examples.

4.

5. 6.

(OR) Discuss the factors affecting a Call and a Put option. Write short notes on: a. Currency swap c. Duration

b.

LIBOR d. Hedging

7.

(OR) Is the futures price of a stock index greater than or less than the expected future value of the Index? Explain your answer. How are Interest rate swaps valued? Explain with examples. (OR) Discuss with an illustration the Modern Portfolio theory.

8. 9.

Reg. No. ________

Karunya University
(Declared as Deemed to be University under Sec.3 of the UGC Act, 1956)

Trimester Examination September / October 2009

Subject Title: OPTIONS, FUTURES AND DERIVATIVES Time : 3 hours Subject Code: 09MS383 Maximum Marks: 100

Answer ALL questions (5 x 20 = 100 Marks)

1. a. Compulsory: Mr Ramesh is bullish about the stock XYZ. Current spot price of the stock is Rs 60. He decides to buy 200 shares of XYZ @ Rs.60 for Rs 12,000. However, he reads in a business daily about the strategy called Covered Straddle. Based on that he buys the following: Long 100 shares of XYZ @ 60 in spot market Short 1 January 60 Call @ 5.85 ( 1 Lot = 100) Short 1 January 60 Put @ 4.78 ( 1 Lot = 100) Compute his profit/loss on the following scenarios: i. On expiry the XYZ spot goes to Rs 50. ii. On expiry XYZ spot goes to Rs 65. Compute his profit and loss at these two scenarios and advise him the advantage of using Covered Straddle strategy. (4)

b.

October futures contract on XYZ Ltd. closed at Rs. 3,153 on October 20 and at Rs. 3,150 on October 21. On October 20th Raju had a short position of 5000 in the October futures contract. On October 21, he sells 15,000 units of October expiring Put Options on ABC Ltd. at strike price of Rs.3,145 for a premium of Rs.30 per unit. What is his net obligation to / from the Clearing Corporation for October 21? (4) You are the owner of a Rs. 2 crores portfolio with a beta 0.85. You would like to insure your portfolio against a fall in the index of magnitude higher than 10 %. Spot Nifty stands at 4,000. You plan to buy Put options on the Nifty that are available at any strike price you want. Which strike will give you the insurance you want? (4) Mrs. Robert sold a November Nifty Futures contract worth Rs 4,80,000 on November 3, 2009. Each Nifty contract is for 100 Nifties. On the last Thursday of November (26-11-09), the spot nifty closes at 4,450. How much profit/loss did she make? (4) Mr Raj is bullish about Index. Today, Spot Nifty stands at 5,250. He decides to buy one lot of three-month Nifty call option contract with a strike of 5,290 at Rs 25per call. One lot is equal to 100. Three months later the index closes at 5,430. Calculate his pay-off after deducting the premium paid. (4)

c.

d.

e.

2.

3.

Introduction of Derivatives trading in India helped investors to hedge their risk Do you agree? Discuss your answer. (OR) [P.T.O] Discuss in detail the role of clearing corporation in Clearing & Settlement of derivatives trading detailing daily resettlement, final settlement, initial margin and mark-to-market margins. Discuss in detail how: Stock Spot Price Volatility Time (Days) Strike Price Dividends Interest Rate - affects the price (premium) of an options contract (both call and put). (OR) Discuss in detail the Time Spreads and Vertical Spreads giving details: Characteristics, When to use (opinion), Profit & Loss Characteristics and Break-even point. a. b. c. d. e. f. Write Short Notes on: a. Fair Futures Price Stock and Commodities b. Backwardation and Carrying Charges

4.

5.

6.

c. d. 7. 8.

Index Futures Difference between Forwards and Futures (OR) Discuss in detail the characteristics and uses of Currency Swaps. What are the risks involved to corporate with respect to fast changing interest rates? How they hedge this risk? Discuss the tools used by the corporate to hedge this risk? (OR) Clearing and Settlement function of Commodity Derivatives trading is complicated when compared to Financial Derivatives - Why? Discuss.

9.

Reg. No. ________

Karunya University
(Karunya Institute of Technology and Sciences)
(Declared as Deemed to be University under Sec.3 of the UGC Act, 1956)

Supplementary Examination July 2010

Subject Title: OPTIONS, FUTURES AND DERIVATIVES Time: 3 hours Subject Code: 09MS383 Maximum Marks: 100

Answer ALL questions (5 x 20 = 100 Marks)

1. a. b. Discuss about derivatives market in India. (10) Define derivatives and explain about the participants of derivatives market. (10) (OR) Briefly explain about option contract. (10) Explain about the listed options. (10) Explain about the concept of spread in option trading. (10) How is call option valued according to Black Scholes model? (10) (OR) Write about factors determining option values. (10) What do you mean by intrinsic value and time value in option valuation?

2.

a. b.

3.

a. b.

4.

a. b. (10)

5.

a.

b. example. 6. a. b.

Define and brief about the features of futures contract. (10) What is marking to the market in futures trading? Explain it with suitable (10) (OR) Distinguish between forwards and futures contract. (10) Explain about delta hedging. (10)

7.

Compulsory: Explain about modern portfolio theory.

8.

a. b.

9.

a. b.

Discuss about the different variants of interest-rate swap. (10) Explain about currency swap. (10) (OR) Explain about commodity futures pricing. (10) Write about swap pricing. (10)