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Financial
Derivatives
Dec
2025 Examination
Q1. Rohan is an
investor interested in Global Tech Ltd., which is currently trading at Rs.1,800
per share. He is considering two options contracts:
A call option
with a strike price of Rs.1,750 and a premium of Rs.120 per share. A put option
with a strike price of Rs.1,850 and a premium of Rs.100 per share. Calculate
the intrinsic value, time value, and profit or loss for both the call and put
options if the stock price rises to Rs.1,900 at expiry and if the stock price
remains at Rs.1,800 at expiry
Also comment
what should be the minimum stock price at expiry at which Rohan will make a
profit on the call option, and the maximum stock price at expiry at which he will
make a profit on the put option. (10 Marks)
Q2(A). Priya, an
investor, buys 50 futures contracts of ABC Ltd. at a futures price of Rs.2,000
per share, with each contract representing 10 shares. The exchange requires
daily mark-to-market (MTM) settlement. Over the next three days, the closing
futures prices are Rs.2,020 on Day 1, Rs.2,010 on Day 2, and Rs.1,990 on Day 3.
Calculate Priya’s daily profit or loss based on the change in futures prices
each day. Also determine the total net gain or loss for Priya after the three
days of MTM settlement. (5 Marks)
Q2(B). ABC Ltd.,
an Indian exporter, is expecting to receive USD 100,000 from a client in the
United States in three months. The current exchange rate is Rs.82/USD, but the
company is concerned that the rupee may strengthen by the time the payment is
received, reducing the rupee value of the payment. Explain how ABC Ltd. can use
a forward contract to hedge against this exchange rate risk. (5 Marks)
Dear students, get fully
solved assignments by professionals
Do send your query at :
or call us at :
08263069601
(Plagiarism proofed
assignments available with 100% surety and refund)
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