Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2018 Summer 4th Sem 2840202 Risk Management Rm Previous Question Paper
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 4 ? EXAMINATION ? SUMMER 2018
Subject Code: 2840202 Date:30/05/2018
Subject Name: Risk Management (RM)
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
4. Provide Table of Standard Normal Distribution, N(d), for Values of d ?
Q. No. Choose the correct option: 6
Q.1 (a) Spot value of Nifty is 2140. An investor buys one month Nifty
2157 call option for a premium of Rs. 7. The option is:
1.
A. ITM B. OTM
C. ATM D. None of the above
2.
Which of the following cannot be an underlying asset for the
financial Derivative contract?
A. Equity Index B. Commodities
C. Interest Rate D Foreign Exchange
3.
Typically option premium is :
A. Less than the
sum of intrinsic
value and time
value
B. Equal to the sum of intrinsic value
and time value
C. Greater than the
sum of intrinsic
value and time
value
D. Independent of intrinsic value and
time value.
4.
The regulatory framework for the derivatives market in India has
been developed by the :
A. L C Gupta
Committee
B. A C Gupta Committee
C. J R Verma
Committee
D. None of the Above
5.
The NEAT- F & O trading system supports an:
A. Order Driven
market
B. Price Driven Market
C. Demand driven
Market
D. None of the above
6.
A Stock is currently selling at INR 70. The call option to buy the
stock at INR 65 costs INR 9. What is the time value of the
option?
A. INR 4 B. INR 3
C. INR 5 D. INR 2
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Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 4 ? EXAMINATION ? SUMMER 2018
Subject Code: 2840202 Date:30/05/2018
Subject Name: Risk Management (RM)
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
4. Provide Table of Standard Normal Distribution, N(d), for Values of d ?
Q. No. Choose the correct option: 6
Q.1 (a) Spot value of Nifty is 2140. An investor buys one month Nifty
2157 call option for a premium of Rs. 7. The option is:
1.
A. ITM B. OTM
C. ATM D. None of the above
2.
Which of the following cannot be an underlying asset for the
financial Derivative contract?
A. Equity Index B. Commodities
C. Interest Rate D Foreign Exchange
3.
Typically option premium is :
A. Less than the
sum of intrinsic
value and time
value
B. Equal to the sum of intrinsic value
and time value
C. Greater than the
sum of intrinsic
value and time
value
D. Independent of intrinsic value and
time value.
4.
The regulatory framework for the derivatives market in India has
been developed by the :
A. L C Gupta
Committee
B. A C Gupta Committee
C. J R Verma
Committee
D. None of the Above
5.
The NEAT- F & O trading system supports an:
A. Order Driven
market
B. Price Driven Market
C. Demand driven
Market
D. None of the above
6.
A Stock is currently selling at INR 70. The call option to buy the
stock at INR 65 costs INR 9. What is the time value of the
option?
A. INR 4 B. INR 3
C. INR 5 D. INR 2
2
Q.1 (b) Define the following terms:
(i) Over the counter market
(ii) Greeks in Option
(iii) Marking- to- Market
(iv) Market order and Limit order
04
Q.1 (c) Discuss: Interest Rate derivative in India. 04
Q.2 (a) What do you mean risk and Derivatives? What are the
Derivatives and how it is used for management of Risk?
Explain in detail.
07
(b) Define the forward and futures contract. Explain features of it
and the various hedging strategies using futures contract.
07
OR
(b)
Explain the Principle of Put call Parity with example.
07
Q.3 (a) What do you mean by option contract? Explain the features
option. Also explain the factors which affect option price.
07
(b) British airline uses 20000 barrels of aviation fuel every
month. On January 1, British Airlines would like to hedge the
price risk of aviation fuel for March and would like to enter
into a futures contract with expiry on February 28. Since
there are no futures on aviation fuel, the chief financial
officer of British Airlines decides to enter into February Crude
oil futures. The crude oil futures contract size is 100 barrels
and the price of these futures on January 1, is USD 72 per
barrel. The standard deviation of the fuel price is USD6, and
the standard deviation of the crude oil futures price is USD 4.
The Correlation between the aviation fuel price and the
crude oil price is 0.90. How many futures contracts should
British Airlines should enter into and what will be hedging
effectiveness?
07
OR
Q.3 (a) Gujarat Motors are selling are INR 991.55 on May 10. The
contract size for Gujarat Motors is 200, and the futures
expire on June 29. The Risk free interest rate is 7%
(Continuous compounding) What will be the June futures
price on May if no dividend will be paid before June 29?
07
(b) ITC share shares are selling at for INR 235 on April 18.
Futures contract are available with maturity on April 29 and
June 29. ITC is expected to pay dividend of INR 40 per
share on June. The Risk free rate is 8%. Calculate the price
at which futures contract of April 29, and June 29 is selling?
07
Q.4 (a) Discuss the combination strategy of option trading with
payoff in detail.
07
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Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER 4 ? EXAMINATION ? SUMMER 2018
Subject Code: 2840202 Date:30/05/2018
Subject Name: Risk Management (RM)
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
4. Provide Table of Standard Normal Distribution, N(d), for Values of d ?
Q. No. Choose the correct option: 6
Q.1 (a) Spot value of Nifty is 2140. An investor buys one month Nifty
2157 call option for a premium of Rs. 7. The option is:
1.
A. ITM B. OTM
C. ATM D. None of the above
2.
Which of the following cannot be an underlying asset for the
financial Derivative contract?
A. Equity Index B. Commodities
C. Interest Rate D Foreign Exchange
3.
Typically option premium is :
A. Less than the
sum of intrinsic
value and time
value
B. Equal to the sum of intrinsic value
and time value
C. Greater than the
sum of intrinsic
value and time
value
D. Independent of intrinsic value and
time value.
4.
The regulatory framework for the derivatives market in India has
been developed by the :
A. L C Gupta
Committee
B. A C Gupta Committee
C. J R Verma
Committee
D. None of the Above
5.
The NEAT- F & O trading system supports an:
A. Order Driven
market
B. Price Driven Market
C. Demand driven
Market
D. None of the above
6.
A Stock is currently selling at INR 70. The call option to buy the
stock at INR 65 costs INR 9. What is the time value of the
option?
A. INR 4 B. INR 3
C. INR 5 D. INR 2
2
Q.1 (b) Define the following terms:
(i) Over the counter market
(ii) Greeks in Option
(iii) Marking- to- Market
(iv) Market order and Limit order
04
Q.1 (c) Discuss: Interest Rate derivative in India. 04
Q.2 (a) What do you mean risk and Derivatives? What are the
Derivatives and how it is used for management of Risk?
Explain in detail.
07
(b) Define the forward and futures contract. Explain features of it
and the various hedging strategies using futures contract.
07
OR
(b)
Explain the Principle of Put call Parity with example.
07
Q.3 (a) What do you mean by option contract? Explain the features
option. Also explain the factors which affect option price.
07
(b) British airline uses 20000 barrels of aviation fuel every
month. On January 1, British Airlines would like to hedge the
price risk of aviation fuel for March and would like to enter
into a futures contract with expiry on February 28. Since
there are no futures on aviation fuel, the chief financial
officer of British Airlines decides to enter into February Crude
oil futures. The crude oil futures contract size is 100 barrels
and the price of these futures on January 1, is USD 72 per
barrel. The standard deviation of the fuel price is USD6, and
the standard deviation of the crude oil futures price is USD 4.
The Correlation between the aviation fuel price and the
crude oil price is 0.90. How many futures contracts should
British Airlines should enter into and what will be hedging
effectiveness?
07
OR
Q.3 (a) Gujarat Motors are selling are INR 991.55 on May 10. The
contract size for Gujarat Motors is 200, and the futures
expire on June 29. The Risk free interest rate is 7%
(Continuous compounding) What will be the June futures
price on May if no dividend will be paid before June 29?
07
(b) ITC share shares are selling at for INR 235 on April 18.
Futures contract are available with maturity on April 29 and
June 29. ITC is expected to pay dividend of INR 40 per
share on June. The Risk free rate is 8%. Calculate the price
at which futures contract of April 29, and June 29 is selling?
07
Q.4 (a) Discuss the combination strategy of option trading with
payoff in detail.
07
3
(b) The Contract Size of Bank of India options are 950. Bank of
India shares are selling at INR 338 on September 1. Call
options and put options are available with expiry on October
29 and with an exercise price of INR 350. It is expected that
the Bank of India share price will be either INR 360 or INR
320. The risk free rate is 9%. Using Binomial option pricing
Model, Calculate the call option price on 1
st
September.
07
OR
Q.4 (a) How Option Spread strategy- Bull spread, Bear spread, and
protective put can be created? Explain with examples.
07
(b)
Assume that Tata Motors is currently selling for INR 480.
There is call option on Tata Motors with maturity of 90 days
and an exercise price of INR 500. The volatility in the stock
price is estimated to be 20%. The risk free rate is 8%. What
will be the price of a call & put option that has maturity of 90
days as per Black and Scholes Model?
07
Q.5 Hyundai motors exports cars to Germany, and every three
months, it receives EUR 500,000 from car shipments. On
March 1, the exchange rate between the Indian Rupee and
Euro is EUR 1= INR 70.7242. The euro interest rate is 6%
per annum, while interest rate in India is 9% per annum.
Hyundai wants to hedge its euro receipt through forward
contract for the next 6 months. The 180-days forward rate is
EUR 1= INR 71.5642.
(i) What type of hedging strategy could be suitable for
Hyundai?
(ii) Calculate 90 days and 180 days theoretical forward
rate.
(iii) Identify whether there is any arbitrage opportunity.
(iv) If there is an arbitrage opportunity, calculate the
arbitrage profit for EUR 500,000.
14
OR
Q.5 You believe that the share price of Biocon is likely to
increase from its price of INR 238.50 on March 15. There are
futures contracts available on Biocon with expiry on June 30
at a futures price of INR 245. The contract size for Biocon
futures is 1800 shares. You plan to buy 9000 Biocon shares
on 30
th
June. Since the price at which you can buy Biocon
shares on 30
th
June, is uncertain on March 15, you plan to
hedge using futures.
(i) What do you mean by hedge?
(ii) What type of hedging is appropriate?
(iii) Explain how you would hedge?
(iv) What would be the result of your hedge, that is, what
is the effective price at which you would sell the
shares if the price of Biocon shares on 30
th
June is
INR 260?
14
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This post was last modified on 19 February 2020