4103Financial Derivitives

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S.G.B.A.U

DEPARTMENT OF BUSINESS ADMINISTRATION AND MANAGEMENT

INTERNAL EXAMMBA -II

Year 2013-14SUBJECT: Financial Derivatives

Time : Three Hours] [Full Mark: 70

Section A

Q.1 .a. What are the different types of Financial Derivative? Explain their feature in brief. 14M

OR

b. Define the term Derivative? Compare between Forward and Future Contract? 14M

Section B

Q.2.a.Define forward contract. Discuss its features with suitable example. 7M

b. Calculate the forward price from the following information:

The current price of the asset = 5,00,000

Risk free rate of return = 7.5% p.a

Time to expiration =75 days 7M

OR

c. How do you determine the price of the following investment assets?

a)Investment asset which generate no income.

b) Investment asset which generate cash income.

c) Investment asset which generate percentage income. 7M

d. From the following information , find the value of forward contract.

Date of the contract = 1stJanuary 2014

Forward price as on 1stJanuary 2014 with expiry date 30

thJune 2014 = Rs 50,000

Forward price as on 1stApril with expiry date 30

thJune 2014 = Rs 65000

Rate of interest = 5% p.a 7M


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Q.3.a.Define the concept of future contract. Discuss its features. 7M

b. Show the in currencies of Call notices on the basis of following data relating to the trade of 3

month XYZ 500 future.

Date of Trade Future price Rs

15 January 60.68

16 January 58.09

17 January 53.75

18 January 50.00

19 January 51.50

22 January 52.60

23 January 48.00

24 January 55.07

25 January 56.00

Assume that the initial margin is 6500 and maintenance margin is 2000. 7M

OR

c. What is margin money? why it is collected ?What are the different form of margin money?

d. Determine the future price from the following data

Spot price = Rs 1700

Storage Cost =3% p.a

Convenience yield =2%

Risk free interest rate =10% p.a

Time period = 4 month 7M

Q.4.a. Define the concept Swap. Briefly discuss the feature of swap contracts. 7M

b. Calculate the price of currency swap between domestic currency bond of USD 1,500 and

foreign currency bond of JPY 4,200.the exchange rate of JPY 75=USD 1.2.the trader hold the

bond in domestic currency. 7M


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OR

c. Discuss various type of interest rate Swap with the suitable example? 7M

d. Company A and B both wish to borrow 10 crore for 5 years. Company B wants to arrange a

floatation rate loan. The rate of interest in 6 month LIBOR Company A wants to arrange a fixrate loan. They have been offered the following items.

Company Fix rate Floating rate

A 10.0% Six month LIBOR +0.3 %

B 11.2% Six month LIBOR +1.0 %

Show the transaction with intermediary and without intermediary. 7M

Section C

Q.5.From the following data, calculate the price of the call option and the put option by using

Black &schools option pricing formula:

1) Current stock price = Rs 160 per share

2) Volatility of the share = 20%

3) Risk free interest rate = 8% p.a

4) Exercise Price = Rs 150

5) There is a call option as well as put option on the share ,expiring in 6 months.14M

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4103Financial Derivitives