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New Delhi Institute of Management: PGDM 2020-22 Semester-III Paper 2 (Set-B)

This document contains an exam for a course on Financial Risk Management. [Section A] contains two multiple choice questions, one asking to calculate the fair value of an ITC future contract and the other asking to calculate the initial margin requirement for a Nifty future contract. [Section B] asks a student to advise a client on how to hedge her equity portfolio against market volatility using Nifty futures and explains option/future strategies for different market scenarios.

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68 views2 pages

New Delhi Institute of Management: PGDM 2020-22 Semester-III Paper 2 (Set-B)

This document contains an exam for a course on Financial Risk Management. [Section A] contains two multiple choice questions, one asking to calculate the fair value of an ITC future contract and the other asking to calculate the initial margin requirement for a Nifty future contract. [Section B] asks a student to advise a client on how to hedge her equity portfolio against market volatility using Nifty futures and explains option/future strategies for different market scenarios.

Uploaded by

bhushan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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New Delhi Institute of Management

PGDM (G) / PGDM (M) / PGDM (F)

PGDM 2020-22 Semester-III


End Term Examination | January, 2022
PAPER 2 (SET-B)
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Sub.: Financial Risk Management (Major-1) Paper Code: FM-05
Max. Marks: 20 Duration: 2 Hour
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Notes: 1. Answer all questions from Section–A (10 Marks)
2. Section-B is compulsory (10 Marks)
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SECTION – A

Q1.A Following information pertains to ITC on 26th Nov 2021


Face Value : 1.00
Current Market Price : 225.50
Nifty : 17,850.25
Opportunity Cost : 6.50%
Beta : 1.12
Dividend : 40%
Expiry : 1 month
Calculate the Fair Value of December Future contract for ITC

Q1.B Explain the following terms:


a. Long Put (show payoff diagram with example)
b. Hedging
(3 Marks + 2+2 Marks)

Q2. The following information pertains to Nifty on 26th Nov 2021


Current Market Price : 17500
December Future Price : 17600
Lot Size : 600
Standard Deviation : 14% p.a.
Calculate the Initial Margin Requirement for the December Future contract of Nifty
(3 Marks)
Section – B (10 Marks)

1. Ms. Anjali is holding an equity portfolio which is mentioned below. She is concerned with the rising
volatility of the market and wants to protect her portfolio against a sudden fluctuation. Expiry 30 Dec Nifty
is trading at 17500. As a Derivative Analyst advise Ms. Anjali and show the detailed Hedging calculation

Stock Amount Beta


HDFC Bank 200000 1.3
NTPC 700000 1.4
Hero MotoCorp 300000 1.15
ONGC 800000 1.5
JK Paper 700000 1.1
TNPL 600000 1
Can Bank 250000 1
(7 Marks)

2. Which Option / Future strategy you would prefer in the below scenarios (1.5+1.5 Marks)
a. Expecting stock to bullish
b. Expected Volatility is Low and no clarity on direction

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