Gujarat Technological University 2011 M.B.A Risk Management (RM) - Question Paper
Seat No. Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
M.B.A. Sem - IV Examination May 2011
Subject Name: Risk Management Date:24/05/2011 Time: 02.30 pm - 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.
Q.1 (a) What are the major stock indices in India? Explain in detail about the Sensex and 07 S&P CNX Nifty Indices.
(b) Explain the users of derivatives and state the reasons for using the derivatives 07 product.
Q.2 (a) Differentiate between call and put options. What are the rights and obligations of the 07 holders of long and short positions in them?
(b) An agreement by IDBI Bank to receive 6-month MIBOR (Mumbai Inter-bank Offer 07 Rate) and pay a fixed rate of 5.0% per annum every 6-month for 3 years on a notion principal of Rs. 100 millions. What is received / paid by IDBI Bank? Assume MIBOR Rate
Time Period MIBOR Rate (%)
|
0 |
4.2 |
|
1 |
4.8 |
|
6 |
5.3 |
|
12 |
5.5 |
|
18 |
5.6 |
|
24 |
5.9 |
|
30 |
6.4 |
OR
(b) From the following data, calculate the values of call and put options using Black and 07 Scholes model: Current price of share is Rs. 486, Exercise price is Rs. 500, Time to expiration 65 days, standard deviation is 54% , Continuously compounded rate of interest is 9% p.a. and no divided is expected during the period. Assume 365 days year.
|
Q.3 |
(a) |
What are the advantages of futures contract over forward contract? |
07 |
|
(b) |
Discuss the nature of currency swaps and explain different types of currency swaps |
07 | |
|
OR | |||
|
Q.3 |
(a) |
Explain the principles of put-call parity with suitable example. |
07 |
|
(b) |
What do you understand by commodity futures? What are the benefits of commodity |
07 | |
|
futures at national level? |
Q.4 (a) What do you understand by risks and what are different ways of classifying and 07 managing them?
(b) What are the differences between exchange traded and over-the-counter derivatives? 07
(a)
(b)
Q.5
(a)
(b)
07
07
07
Q.5 (a)
OR
Discuss the various factors affecting the prices of options.
Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome then an imperfect hedge? Explain your answer.
What are the benefits of trading in Index Futures compared to any other security? Distinguish between the open interest and trading volume.
OR
An investor buys 4 futures contract of gold at MCX of India. Each contract is of 100 grams of gold. The price quotation is Rs. 21,500 per 10 grams. Initial margin is set at 5%, while minimum margin is 90% of the initial margin. Find out the gain or loss on daily basis, position of margin account and margin call if any on daily basis when the contracts are marked-to-market. The clearing prices of the next 8 days are given and it is also assumed that on 8th day investor square off his position at price Rs. 21800.
|
Day |
0 |
1 |
2 |
3 |
4 |
|
Closing Price |
21500 |
21450 |
21300 |
21400 |
21600 |
|
Day |
5 |
6 |
7 |
8 | |
|
Closing Price |
21200 |
21500 |
21550 |
21800 |
(b) Stock price of Wipro Ltd. is Rs. 500. If the risk-free rate of interest is 10% p.a. continuously compounding, then at what minimum price following call options on the stock of Wipro would sell for:
07
(a) A Call with strike price of Rs. 450 maturing 1 month later
(b) A Call with strike price of Rs. 500 maturing 2 months later
(c) A Call with strike price of Rs. 550 maturing 3 months later
*************
|
Attachment: |
| Earning: Approval pending. |
