Tiêu đề SOL_MBA_Sem-3_Financial Derivatives PYQP_June'24.pdf ✅

7188 2 SECTION A (2xl0-20) Case Study- All questions are compulsory. Please go through the case and attempt the two (02) questions given at the end of the case. Make and state suitable assumptions wherever necessary. A Bank is concerned about the expected volatility in the market in next six months which may be 25%. To minimize the risk, he asked for your advice on an Options writing for the stock having a spot price Rs.100 and strike price of Rs 105 with the option of 6 months from now. The prevailing risk-free rate of return is 7°/o per annum. Based on this infomation. Suggest the Call and Put Options Premium using Black-Scholes Model. 3. Wliat will t)e the call and putoptions premium using Binomial model'? 7188 6. What are basis and basis risk? Show how a change in basis will impact the short hedge. 7. The 2-month interest rates in Switzerland and the United States are, respectively,1% and 2% per annum with continuous compounding. The spot price of the Swiss franc is $1.0500. The futures price for a contract deliverable in 2 months is also $1.0500. What arbitrage opportunities does this create? Further a company has a $20 million portfolio with a beta of 1.3. It would like to use futures contracts on a stock index to hedge its risk. The index futures price is currently standing at 1080, and each contract is for delivery of $250 times the index. What is the hedge that minimizes risk? What should the company do if it wants to reduce the beta of the portfolio to 0.4? I) . T . 0 .