SVKM’s NMIMS

Anil Surendra Modi School of Commerce

Academic Year: 2022-23
Programme: BBA Year: III
Date: 19-May-2023 Semester: VI
Subject: Forex and Risk Management in Derivatives Batch: 2020-23
Total: 50 marks Time: 09:30 a.m. to 11:30 a.m. (2 hours)
Number of worksheets: 6

Instructions:
a) All questions carry 10 marks each. Attempt any five out of the six questions. All sub-questions within a question are compul
b) Figures to the right indicate maximum marks
c) All questions should be solved below the question in the same worksheet.
d) The MS Excel file containing your answers should be saved at the location as advised by the exam invigilator.
e) Necessary workings should form a part of your answer.
f) CLO: Course Learning Objective; BL: Bloom's Taxonomy Level
 within a question are compulsory.

xam invigilator.
Question no. 1 CLO 1; BL 3 10 marks

Consider the below-mentioned monthly closing prices/ values of five securities listed on a stock exchange in India and the equi
You are required to:
a) Calculate the 99.9% 1-day VaR for the portfolio of securities after optimising the portfolio returns.
b) Calculate the Treynor's ratio of the portfolio optimised in (a) above.
Assume risk-free rate of 5% p.a., 252 trading days in a year and portfolio value of Rs. 1,000 crores.
Minimum 1% of the portfolio value must be invested in each stock.

Month HHFC Bank Yum Pizzas Candy works Wheeler Auto MedPharma Co. Sensex
Apr-13 682.15 1108.35 4980.85 1881.80 951.30 19504.18
May-13 700.45 1102.65 5315.90 1822.65 1045.50 19760.30
Jun-13 668.50 1045.05 4867.00 1917.45 1008.50 19395.81
Jul-13 609.70 1126.65 5294.65 1935.70 564.05 19345.70
Aug-13 593.80 1003.35 4901.35 1839.50 519.80 18619.72
Sep-13 593.70 1155.00 5198.55 1988.20 592.55 19379.77
Oct-13 679.45 1187.35 5592.45 2129.00 607.95 21164.52
Nov-13 661.20 1315.05 5137.30 1974.75 572.15 20791.93
Dec-13 665.75 1267.20 5297.25 1910.55 567.75 21170.68
Jan-14 628.90 1070.80 5044.30 1902.80 588.15 20513.85
Feb-14 667.50 1031.15 4849.80 1942.70 642.70 21120.12
Mar-14 748.85 1066.65 5008.15 2078.30 573.35 22386.27
Apr-14 718.25 945.85 4772.00 1913.45 631.55 22417.80
May-14 794.10 1157.80 4938.70 1953.15 607.40 24217.34
Jun-14 821.35 1308.95 4946.00 2313.20 686.25 25413.78
Jul-14 833.65 1258.35 5125.05 2078.20 790.70 25894.97
Aug-14 842.95 1293.55 5998.45 2259.75 854.55 26638.11
Sep-14 871.50 1230.55 5979.55 2348.95 857.30 26630.51
Oct-14 912.20 1256.65 6237.45 2609.05 845.55 27865.83
Nov-14 957.40 1428.60 6226.10 2639.60 839.55 28693.99
Dec-14 952.00 1375.70 6379.80 2438.45 826.15 27499.42
Jan-15 1076.00 1392.85 7109.10 2389.35 915.95 29182.95
Feb-15 1067.85 1644.10 7001.60 2161.80 911.00 29361.50
Mar-15 1022.85 1478.75 6941.90 2017.35 1022.25 27957.49
Apr-15 989.20 1485.75 6580.90 1949.40 939.40 27011.31
May-15 1051.10 1789.60 6857.10 2315.00 965.75 27828.44
Jun-15 1067.45 1856.25 6345.65 2535.65 874.20 27780.83
Jul-15 1111.20 1831.65 6343.05 2519.15 822.75 28114.56
Aug-15 1028.15 1668.40 5976.10 2254.90 897.70 26283.09
Sep-15 1068.90 1602.75 6350.35 2309.75 868.45 26154.83
Oct-15 1097.05 1461.45 6179.50 2549.60 889.00 26656.83
Nov-15 1075.95 1543.25 5872.65 2481.55 730.65 26145.67
Dec-15 1082.75 1483.90 5824.10 2533.50 819.95 26117.54
Jan-16 1048.95 1268.85 5490.60 2341.90 873.00 24870.69
Feb-16 972.55 996.35 5012.35 2200.40 855.05 23002.00
Mar-16 1071.20 1273.45 5768.95 2406.10 819.45 25341.86
Apr-16 1133.45 1157.05 5743.85 2484.60 811.30 25606.62
May-16 1181.35 1032.60 6098.85 2618.90 762.70 26667.96
Jun-16 1175.90 1137.25 6488.75 2686.25 763.60 26999.72
Jul-16 1246.55 1222.20 7165.60 2702.00 829.75 28051.86
Aug-16 1290.75 1173.35 6559.50 2980.95 774.85 28452.17
Sep-16 1271.70 960.10 6428.20 2832.15 742.70 27865.96
Oct-16 1253.70 1007.45 6942.65 2833.45 748.25 27930.21
Nov-16 1199.60 919.25 6256.65 2683.75 710.30 26652.81
Dec-16 1204.20 854.75 6029.80 2633.85 629.75 26626.46
Jan-17 1286.95 876.65 5842.20 2837.75 631.55 27655.96
Feb-17 1389.20 1007.75 6255.05 2758.25 678.95 28743.32
Mar-17 1442.30 1106.15 6681.20 2807.50 687.70 29620.50
Apr-17 1542.15 1038.85 6702.40 2868.35 642.55 29918.40
May-17 1633.35 914.05 6657.15 2843.95 501.40 31145.80
Jun-17 1652.25 945.45 6723.05 2790.50 554.50 30921.61
Jul-17 1783.35 1317.00 6750.25 2807.60 531.70 32514.94
Aug-17 1775.00 1391.85 7101.10 2808.45 480.35 31730.49
Sep-17 1803.05 1388.05 7222.25 3108.15 503.20 31283.72
Oct-17 1808.80 1633.75 7221.10 3260.00 553.40 33213.13
Nov-17 1852.05 1775.45 7650.00 3311.70 539.95 33149.35
Dec-17 1873.55 1762.05 7845.00 3323.20 570.80 34056.83
Jan-18 2006.35 2031.60 7464.80 3338.80 579.35 35965.02
Feb-18 1883.80 2033.15 7764.35 3018.80 535.35 34184.04
Mar-18 1891.45 2326.65 8202.15 2748.90 495.40 32968.68
Apr-18 1944.60 2549.00 9406.35 2948.00 528.15 35160.36
May-18 2136.15 2512.10 9657.75 2752.15 480.15 35322.38
Jun-18 2108.05 2774.80 9808.55 2811.15 560.55 35423.48
Jul-18 2181.05 2812.10 10537.20 2700.70 566.65 37606.58
Aug-18 2062.25 3098.10 11576.60 2746.35 652.20 38645.07
Sep-18 2005.65 2449.40 9705.70 2687.10 623.35 36227.14
Oct-18 1911.85 2163.60 10122.10 2591.45 579.15 34442.05
Nov-18 2117.15 2509.20 10718.95 2736.80 492.30 36194.30
Dec-18 2122.45 2504.40 11107.25 2718.50 430.65 36068.33
Jan-19 2081.15 2519.30 11469.80 2553.35 425.60 36256.69
Feb-19 2082.15 2539.90 10627.00 2896.45 445.40 35867.44
Mar-19 2316.50 2885.80 10994.25 2915.05 479.25 38672.91
Apr-19 2315.50 2648.10 10903.20 2993.25 456.95 39031.55
May-19 2424.90 2615.20 11486.65 2925.25 409.50 39714.20
Jun-19 2446.40 2465.70 11920.65 2828.15 401.00 39394.64
Jul-19 2251.80 2402.50 11671.70 2517.50 426.75 37481.12
Aug-19 2228.90 2377.40 12849.95 2788.10 450.65 37332.79
Sep-19 2454.70 2717.70 13912.50 2941.90 389.65 38667.33
Oct-19 2459.90 3201.90 14961.40 3246.75 433.60 40129.05
Nov-19 2548.50 3236.40 14455.95 3176.05 449.80 40793.81
Dec-19 2543.60 3305.20 14789.95 3185.50 432.50 41253.74
Jan-20 2451.40 3781.50 15360.85 3178.95 434.00 40723.49
Feb-20 2355.20 3514.20 15770.55 2890.45 372.95 38297.29
Mar-20 1724.00 2940.50 16302.40 2024.90 352.20 29468.49
Apr-20 2003.50 3213.80 17906.10 2627.75 464.85 33717.62
May-20 1902.50 3317.00 17533.85 2712.05 475.45 32424.10
Jun-20 2131.40 3454.60 17178.00 2825.60 472.95 34915.80
Jul-20 2065.30 3439.10 16526.45 3004.40 531.75 37606.89
Aug-20 2230.40 4182.00 15946.10 2971.35 518.50 38628.29
Sep-20 2158.40 4690.00 15924.70 2879.50 500.50 38067.93
Oct-20 2366.90 4353.00 17162.80 2886.45 465.75 39614.07
Nov-20 2881.40 4995.40 17657.60 3172.65 511.55 44149.72
Dec-20 2873.50 5580.10 18392.35 3447.20 592.35 47751.33
Jan-21 2781.60 5183.60 17068.70 4007.10 586.45 46285.77
Feb-21 3068.70 5991.60 16097.70 3800.70 595.30 49099.99
Mar-21 2987.10 5826.10 17170.25 3671.70 597.60 49509.15
Apr-21 2824.40 5782.10 16311.10 3831.25 654.70 48782.36
May-21 3032.80 6221.30 17692.70 4189.50 668.30 51937.44
Jun-21 2996.10 6159.30 17676.75 4133.15 675.50 52482.71
Jul-21 2851.60 7551.20 17702.75 3831.05 774.00 52586.84
Aug-21 3163.00 7991.90 19458.10 3725.70 794.15 57552.39
Sep-21 3191.00 8081.30 19450.75 3832.45 818.20 59126.36
Oct-21 3164.70 7381.50 19002.00 3710.20 794.40 59306.93
Nov-21 2987.20 7303.50 19159.10 3243.15 753.95 57064.87
Dec-21 2959.60 7180.70 19708.55 3250.80 845.40 58253.82
Jan-22 2971.10 6773.70 18527.65 3554.75 834.15 58014.17
Feb-22 2853.40 5821.50 17603.05 3530.85 843.35 56247.28
Mar-22 2939.90 5270.90 17376.80 3652.50 914.80 58568.51
Apr-22 2769.50 5458.00 18308.95 3727.05 928.70 57060.87
May-22 2774.90 5507.00 17770.00 3862.95 860.45 55566.41
Jun-22 2695.00 5117.50 17493.15 3705.65 830.80 53018.94
Jul-22 2868.90 5499.50 19352.40 3913.40 943.55 57570.25
Aug-22 2972.40 6163.50 19930.75 4085.10 893.25 59537.07
Sep-22 2844.80 6231.00 19124.60 3527.10 949.00 57426.92
Oct-22 2992.80 6107.00 20367.90 3669.25 1015.95 60746.59
Nov-22 3217.50 5472.00 20105.85 3750.30 1044.35 63099.65
Dec-22 3254.60 5109.50 19598.80 3615.90 1000.70 60840.74
Jan-23 3206.90 4871.00 19015.55 3818.80 1035.00 59549.90
Feb-23 3202.50 4401.50 18657.95 3660.90 957.00 58962.12
Mar-23 3219.50 4403.00 19691.85 3883.85 983.10 58991.52
ange in India and the equity market benchmark index. Solution: (Type your answers below this space)
Question no. 2 CLO 1; BL 3

Consider the below-mentioned data on the spot and future prices of certain stocks. Solve and fill the missing values denoted by
Sr. no. Stock name Spot price (Rs) T (days to Dividend (Rs.) Dividend days Spot price adjusted
settlement) for dividend (Rs.)

1 Kelvin Ltd. 1005.00 45 1.65 25 ?

2 PJ Ltd. 199.98 30 - - 199.98
3 Tilburg Ltd. ? 50 2.00 17 ?
4 Sinclair Ltd. 15750.00 ? 14.85 25 ?

Solution: (Type your answers below this space)

 10 marks

e missing values denoted by "?". Assume risk-free rate of 5% p.a. and 365 trading days in a year.
Expected price of Actual price of future Implied cost of
future contract (Rs.) contract (Rs.) carry (% p.a.)

? 1010.80 ?
? 201.15 ?
80.08 81.00 13.34%
239.00 15785.00 ?
Question no. 3 CLO 2, 3; BL 3, 4, 6

Currently Aravind Pharma Ltd. is trading at Rs. 380 per share in the spot market and the company is expected to announce a div
The volatility of returns of the stock is 25% p.a. and the risk-free rate of interest is 6% p.a. on continous compounding basis.
You are required to:
(i) Calculate the prices of European call and put options expiring in the next 45 days, by applying the Black-Scholes option pric
for various strike prices ranging from Rs. 325 to Rs. 400 with intervals of Rs. 5 (Use data table for calculating prices of call
(ii) Analyse the pattern of the prices of the call and put options with respect to their strike prices, calculated in (i) above and com
(iii) Using the prices of call option prices with strike prices of Rs. 360, Rs. 380 and Rs. 400 as computed in (i) above, create a l
and calculate the net cash inflow/ outflow on execution of this strategy.
(iv) Calculate the net profit on expiry for the butterfly strategy devised in (iii) above for the range of stock prices from Rs. 340
(v) Graphically show the net profits of the butterfly option strategy calculated in (iv) above.

Solution: (Type your answers below this space)

 10 marks

y is expected to announce a dividend of Rs 10 per share in the next 20 days.

ntinous compounding basis.

g the Black-Scholes option pricing model.

e for calculating prices of call and put options of different strike prices)
calculated in (i) above and comment on it.
mputed in (i) above, create a long call butterfly option strategy

e of stock prices from Rs. 340 to Rs. 450 with price intervals of Rs. 5.
Question no. 4 CLO 3; BL 3

A swap dealer quotes for a plain vanilla swap "5.6%/ 6% vs. 6-months LIBOR flat". The notional principal amount of the swap
You are required to:
(i) Calculate the first fixed payment by the buyer of the swap.
(ii) Calculate the first floating rate receipt by the buyer, if the effective period from the date of swap to the settlement date com
(iii) Calculate the first floating rate receipt by the buyer, if the effective period from the date of swap to the settlement date com
(iv) If in (ii) and (iii) above, the settlement of the swap was on "net basis", calculate the net amount payable/ receivable by the b
Day convention: 30*n/360 for fixed rate payments; n/365 for floating rate payments, where n=no. of days.

Solution: (Type your answers below this space)

 10 marks

notional principal amount of the swap is Rs. 80,00,000. The total tenure of the swap is 3 years with semi-annual reset periods.

te of swap to the settlement date comprises of 181 days and the corresponding LIBOR was 5% p.a. on the date of the swap.
ate of swap to the settlement date comprises of 181 days and the corresponding LIBOR was 7.5% p.a. on the date of the swap.
et amount payable/ receivable by the buyer and the seller of the swap.
e n=no. of days.
mi-annual reset periods.

the date of the swap.

on the date of the swap.
Question no. 5 CLO 1; BL 3

A commercial bank in Kuwait provides the following quotes.

Sr. No. Quote Amt

1 1 EUR = X JPY 144.50 / 144.65
2 1 JPY = X INR 0.60 / 0.63
3 1 INR = X CHF 0.0100 / 0.0107
4 1 CHF = X KWD 0.34 / 0.37

EUR: Euro
JPY: Japanese Yen
INR: Indian Rupee
CHF: Swiss Franc
KWD: Kuwaiti Dinar

Answer the following questions:

(i) Consider the quote given at Sr. No. 1 in the above table. Is it a direct quote or an indirect quote for a Japanese citizen?
(ii) Consider the quote given at Sr. No. 4 in the above table. Is it a direct quote or an indirect quote for a citizen of Kuwait?
(iii) Calculate the mid rate, spread and spread percentage (using mid rate) for all the quotes given in the above table.
(iv) An importer in Kuwait needs to make a payment of JPY 75,000 to a counterparty in Japan. Calculate the amount of home c

Solution: (Type your answers below this space)

 10 marks

uote for a Japanese citizen?

uote for a citizen of Kuwait?
ven in the above table.
. Calculate the amount of home currency involved in this transaction for the importer.
Question no. 6 CLO 3; BL 1, 2

(i) Explain the concept of "Exotic options". 5 marks

(ii) Explain the concept of margin in derivatives market. 5 marks

Solution: (Type your answers below this space)