M.B.A. DEGREE EXAMINATION, NOVEMBER/DECEMBER 2017.
Third Semester
FINANCIAL DERIVATIVES
2 90335-A
Time 3 Hours Max. Marks 70
SECTION — A
Answer the following questions. 2 10 Marks)
1. Forward contract.
2. Margins.
3. Hedging.
4. Currency options.
5. Commodity swaps.
SECTION — B
Answer the following questions. 10 50 Marks)
6. Explain the growth of financial derivatives in India.
Or
Briefly explain the types of financial derivatives.
7. Explain the fundamental linkages between spot and derivative markets.
Or
Explain the hedging strategies using futures.
8. Explain the limitations of forward contracts.
Or
Explain the futures markets on NSE.

9. What are options? Explain the need and scope of options market.
Or
Discuss the Trading strategies involving options.
10. Explain the evolution of swap market.
Or
What are the major types of financial swaps?
SECTION — C
Compulsory. 10 10 Marks)
11. Case study
A corporate treasurer intends to borrow money in the middle of May for a three
months period. The treasurer may fear that interest rates might have risen by the
data of borrowing. Since a rise in interest rates would add to the cost of borrowing,
a futures position is taken so that there would be on offsetting profit in the event of
rise in interest rate. Three months interest rate futures are quoted on index basis,
Index is 100 minus the futures interest rate. So futures interest rate of 6.5% pa.
would entail a quote of 100-6.5=93.5%. The amount of borrowing is Rs. 5,00,000.
Show the position of treasurer from futures contract. Suppose the interest rate
stands at 6.5% and on May interest rate rises to 8%.
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