Tiêu đề Derivatives Question.pdf ✅

Practice Problems 19 PRACTICE PROBLEMS The following information relates to questions 1-5 Montau AG is a German capital goods producer that manufactures its products domestically and delivers its products to clients globally. Montau’s global sales manager shares the following draft commercial contract with his Treasury team: Montau AG Commercial Export Contract Contract Date: [Today] Goods Seller: Montau AG, Frankfurt, Germany Goods Buyer: Jeon Inc., Seoul, Korea Description of Goods: A-Series Laser Cutting Machine Quantity: One Delivery Terms: Freight on Board (FOB), Busan Korea with all shipping, tax and delivery costs payable by Goods Buyer Delivery Date: [75 Days from Contract Date] Payment Terms: 100% of Contract Price payable by Goods Buyer to Good Seller on Delivery Date Contract Price: KRW650,000,000 Montau AG’s Treasury manager is tasked with addressing the xnancial risk of this prospective transaction. 1. Which of the following statements best describes why Montau AG should con- sider a derivative rather than a spot market transaction to manage the xnancial risk of this commercial contract? A. Montau AG is selling a machine at a contract price in KRW and incurs costs based in EUR. B. Montau AG faces a 75-day timing diwerence between the commercial con- tract date and the delivery date when Montau AG is paid for the machine in KRW. C. Montau AG is unable to sell KRW today in order to owset the contract price of machinery delivered to Jeon Inc. 2. Which of the following types of derivative and underlyings are best suited to hedge Montau’s xnancial risk under the commercial transaction? A. Montau AG should consider a xrm commitment derivative with currency as an underlying, specixcally the sale of KRW at a xxed EUR price. B. Montau AG should consider a contingent claim derivative with the price of the machine as its underlying, specixcally an A-series laser cutting machine.
20 Learning Module 1 Derivative Instrument and Derivative Market Features C. Montau AG should consider a contingent claim derivative with currency as an underlying, specixcally the sale of EUR at a xxed KRW price. 3. Identify A, B, and C in the correct order in the following diagram, as in Exhib- it 1, for the derivative to hedge Montau's xnancial risk under the commercial transaction. Exhibit 1 Montau AG A C B A. A: Financial intermediary, B: KRW650,000,000, C: Fixed EUR amount B. A: Jeon Inc., B: KRW650,000,000, C: Fixed EUR amount C. A: Financial intermediary, B: Fixed EUR amount, C: KRW650,000,000. 4. Which of the following statements about the most appropriate derivative mar- ket to hedge Montau AG’s xnancial risk under the commercial contract is most accurate? A. ye OTC market is most appropriate for Montau, as it is able to customize the contract to match its desired risk exposure proxle. B. ye ETD market is most appropriate for Montau, as it owers a standardized and transparent contract to match its desired risk exposure proxle. C. Both the ETD and OTC markets are appropriate for Montau AG to hedge its xnancial risk under the transaction, so it should choose the market with the best price. 5. If Montau enters into a centrally cleared derivative contract on the OTC market, which of the following statements about credit risk associated with the derivative is most likely correct? A. Montau faces credit risk associated with the possibility that its counterparty to the contract may not fulxll its contractual obligation. B. Montau poses a credit risk to its counterparty because it may fail to fulxll its contractual obligation. C. Montau poses a credit risk to a derivative contract end user holding a con- tract with the opposite features of Montau’s.
50 Learning Module 2 Forward Commitment and Contingent Claim Features and Instruments PRACTICE PROBLEMS The following information relates to questions 1-4 Biomian Limited is a Mumbai-based biotech company with common stock and listed futures and options on the National Stock Exchange (NSE). ye Viswan Family Otce (VFO) currently owns 10,000 Biomian common shares. VFO would like to reduce its long Biomian position and diversify its equity market exposure but will delay a cash sale of shares for tax reasons for six months. 1. Which of the following derivative contracts available to VFO’s chief investment otcer is best suited to reduce exposure to a decline in Biomian’s stock price in the next six months? A. A short put position on Biomian stock that expires in six months B. A long call position on Biomian stock that expires in six months C. A short futures position in Biomian stock that settles in six months 2. VFO’s market strategist believes that Biomian’s share price will rise over the next six months but would like to protect against a decline in Biomian’s share price over the period. Which of the following positions is best suited for VFO to man- age its existing Biomian exposure based on this view? A. A long put position on Biomian stock that expires in six months B. A short call position on Biomian stock that expires in six months C. A long futures position in Biomian stock that settles in six months 3. Assume that Biomian shares rise over the next six months. Which of the fol- lowing statements about VFO’s derivative strategies under this scenario is most accurate? A. A forward sale of Biomian shares in six months would be more proxtable than purchasing the right to sell Biomian shares in six months. B. Purchasing the right to sell Biomian shares in six months would be more proxtable than a forward sale of Biomian shares in six months. C. We do not have enough information to determine whether a forward sale or the right to sell Biomian shares will be more proxtable in six months. 4. VFO’s market strategist is considering a six-month call option strategy on the NIFTY 50 benchmark Indian stock market index to increase broad market equity exposure. ye NIFTY 50 price today is INR15,200, and the strategist observes that a call option with a INR16,000 exercise price (X) is trading at a premium of INR1,500. Which of the following represents the payow and proxt of this strategy just prior to maturity if the NIFTY 50 is trading at INR16,500? A. Payow is INR500; proxt is –INR1,000. B. Payow is INR1,300; proxt is INR800.
Practice Problems 51 C. Payow is INR1,300; proxt is INR500.