Download GTU (Gujarat Technological University) MBA 2019 Winter 4th Sem 3549222 Risk Management Previous Question Paper
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA - SEMESTER ? IV EXAMINATION ? WINTER 2019
Subject Code: 3549222 Date: 2-12-2019
Subject Name: Risk Management
Time: 2.30 PM to 5.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q. No. Marks
Q.1 Define the following:
(a) Good-till-day-order
(b) Currency Swap
(c) Open Interest
(d) Arbitrage
(e) Basis Risk
(f) Delta
(g) Mark to market settlement
14
Q.2 (a) What are derivatives? Explain major types of exchange traded
derivative contracts.
07
(b) ?Derivatives are effective risk management tools in market? Explain
this statement in light of use of derivatives.
07
OR
(b) What is stop loss order? Explain the difference between a market order
and limit order.
07
Q.3 (a) What are forward contracts? How forwards contracts are used in
commodity market to hedge risk? Explain.
07
(b) Suppose that on April 1, 2008, you entered into a forward contract to
buy 100,000 U.S. dollars at USD 1 = INR 42.2478, for delivery on
July 1, 2008. The spot rate on April 1, 2008, is USD 1 = INR 42.1145.
On July 1, 2008, the spot rate is USD 1 = INR 42.3245 and the
forward rate for delivery (three months later) is USD 1 = INR 42.4223.
Did you profit or lose on this transaction? What is the amount of profit
or loss made?
07
OR
Q.3 (a) Differentiate forward with future contracts in detail 07
(b) Sun TV futures contract has a lot size of 1,000 shares. Assume that
you take a short position on 10 Sun TV futures contracts at INR
271.25 at 11 a.m. on September 6. Assume that the initial margin is
10% of the initial contract value and the maintenance margin is 8% of
the initial margin. The following table shows the settlement prices on
the days of trading between September 6 and September 10. You close
out your short position on September 10. Prepare a table showing the
daily margin balances in your account.
07
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Page 1 of 2
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA - SEMESTER ? IV EXAMINATION ? WINTER 2019
Subject Code: 3549222 Date: 2-12-2019
Subject Name: Risk Management
Time: 2.30 PM to 5.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q. No. Marks
Q.1 Define the following:
(a) Good-till-day-order
(b) Currency Swap
(c) Open Interest
(d) Arbitrage
(e) Basis Risk
(f) Delta
(g) Mark to market settlement
14
Q.2 (a) What are derivatives? Explain major types of exchange traded
derivative contracts.
07
(b) ?Derivatives are effective risk management tools in market? Explain
this statement in light of use of derivatives.
07
OR
(b) What is stop loss order? Explain the difference between a market order
and limit order.
07
Q.3 (a) What are forward contracts? How forwards contracts are used in
commodity market to hedge risk? Explain.
07
(b) Suppose that on April 1, 2008, you entered into a forward contract to
buy 100,000 U.S. dollars at USD 1 = INR 42.2478, for delivery on
July 1, 2008. The spot rate on April 1, 2008, is USD 1 = INR 42.1145.
On July 1, 2008, the spot rate is USD 1 = INR 42.3245 and the
forward rate for delivery (three months later) is USD 1 = INR 42.4223.
Did you profit or lose on this transaction? What is the amount of profit
or loss made?
07
OR
Q.3 (a) Differentiate forward with future contracts in detail 07
(b) Sun TV futures contract has a lot size of 1,000 shares. Assume that
you take a short position on 10 Sun TV futures contracts at INR
271.25 at 11 a.m. on September 6. Assume that the initial margin is
10% of the initial contract value and the maintenance margin is 8% of
the initial margin. The following table shows the settlement prices on
the days of trading between September 6 and September 10. You close
out your short position on September 10. Prepare a table showing the
daily margin balances in your account.
07
Page 2 of 2
Date Settlement Values
(INR)
September 6 271.25
September 7 273.80
September 8 276.90
September 9 272.50
September 10 272.10
Q.4 (a) Define and differentiate call option with put option. 07
(b)
On September 1, call and put options are available on the Bank Nifty index
with expiry on September 30. The exercise price of these options is 7,480.
On September 1, the Bank Nifty index is at 7,350. The call is priced at INR
100, and the put option is priced at INR 240. The contract multiplier for the
Bank Nifty index is 50.
If on September 30, the value of the Bank Nifty index is 7,450, what will be
the gain or loss for the call option buyer?
07
OR
Q.4 (a) Write a short note on Black-Scholes options pricing model. 07
(b)
On September 1, put options are selling at INR 140 on ICICI Bank shares
with an exercise price of INR 800 and an exercise date of October 31. ICICI
Bank shares are selling at INR 750 on September 1. The ICICI Bank option
contract size is 350 shares.
If the share price of ICICI Bank is INR 860 on October 31, what will be the
gain or loss for the put option buyer?
07
Q.5
CASE STUDY:
On January 1, you buy 10,000 shares of Jet Airways at INR 1,000, and
you are concerned about a decrease in the price of Jet Airways shares.
There is a March futures contract available. The risk-free rate is 6%,
and Jet Airways is expected to pay a dividend of INR 90 on January
31. The contract in March matures on March 28.
(a) Calculate the futures price of Jet Airways on January 1. 07
(b) On March 28, Jet Airways shares are selling at INR 976. If you hedge
your portfolio with Jet Airways futures and sell your shares on March
28, what will be the realized value of your hedged portfolio?
07
OR
Q.5 (a) What is Butterfly spread? When would you enter into butterfly spread
position?
07
(b)
Jet Airways requires 2,000,000 barrels of aviation fuel every month. Since
the price of aviation fuel depends on the price of crude oil, Jet Airways
faces price risk. At the beginning of each month, Jet Airways goes for a long
hedge in crude oil futures contract for 2,000,000 barrels, with expiry by the
end of that month.
i. What is meant by a long hedge?
ii. What is the purpose of the long hedge undertaken by Jet Airways?
07
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This post was last modified on 19 February 2020