SKR ENGINEERING COLLEGE

DEPARTMENT OF MANAGEMENT STUDIES

Internal assessment-II
BA9261 - DERIVATIVES MANAGEMENT
Max mark: 100 Duration: 180 Min Date: 5.10.2010
Part-A Answer all (10*2=20)
1) Define Hedging.
2) What is option?
3) Define Futures Contract.
4) What is spread?
5) What is call option?
6) What is a currency option?
7) What is exercise price?
8) What is American style and European style of option?
9) What are the two assumptions of B-S model?
10) When is the expiry day for derivative products in NSE?
Part-B Answer all (16*5=80)

11(a) Explain hedging using futures with suitable examples.

(OR)
b) Explain the concept of option in context to: (i) Intrinsic value of option (ii) Time
value of option (iii) In-the-Money (iv) At-the-Money (v) Out-the-Money
12(a) Explain the factors influencing the options pricing.
(OR)
12(b) Discuss the B-S option pricing model in detail.
13(a) Explain the payoff profile of call and put option with an example.
(OR)
13(b) Compare and contrast between forward, futures and option contracts.
14(a) Discuss any four bullish and bearish and neutral option strategies with
examples. (OR)
14(b) Explain the Binomial pricing model with an illustration.
15(a) The stock price of Reliance industries in spot market is Rs 450 and two-month
option contract is of Rs.450. The price of the option is Rs 20 per share. At what price
the option will be at-the-money, In-the-Money and Out-the-Money of the option is
both call as well as put option? (OR)
15(b) Explain the marking to market term used in futures trading and its
mechanism with suitable examples.