IV-MBA (FM-422)-FD

2012
Full Marks-80 Time-3 hours The question are of equal value Answer all Questions

1. What are Derivatives? Write its functions & explain the different factors contributing to the growth of derivatives. OR

Short Notes on:

A. B. C. D. OTC Traded Derivatives Hedger Systematic Risk Exchange Traded Derivatives.

2. What is Future Contract? Write the features and Margin requirement of future contract and the difference between Forward and Future Contract. OR What do you mean by Forward Contract? Explain the different situation of forward pricing Contract along with its Pay-Off profile.

3. State the Assumptions of Black-Scholes option valuation model. Using the BlackScholes model, Calculate the value of a European Call option using the following data: Exercise Price=RS. 40 Stock Price=Rs.42 Time to expiration=6 months Risk Free rate=10% per annum. Variance of Return=0.4 Given: N (0.7693) =0.7791 and N (0.6278) =0.7349

OR Short Notes on: A. B. C. D. Intrinsic Value & Time Value Call Option & Put Option Long Call & Short Put In the money and At the money Option

4. Prove the Statement Swap is a private agreement between two parties along its uses and explain the features of currency swap. OR Company A and B have been offered the following rates per annum on a $20 million five year plan. Fixed rate Floating rate Company A Company B 12% 13.4% LIBOR+0.1 LIBOR+0.6

Company A requires a floating rate loan; company B requires a fixed rate loan. Design a swap that will net a bank, acting as intermediary, 10 Basis point per annum and that will appear equally attractive to both companies. 5. From the following data, calculate the Expected Stock Price, Value of an option and the Option delta (change). If, Type of Option=European Stock price at the initial point of option= RS. 240 Option period =1 year Stock price movement in the next year is (a) Go up by=25% (b) Go down by=20% Exercise price=RS.260 Risk Free interest rate=5% per annum. Risk neutral probability of Up move=0.6 and Down move=0.4.