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Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER 8 EXAMINATION SUMMER 2019
Subject Code: 4180507 Date: 02/05/2019
Subject Name: Risk Management
Time: 10:30 AM To 01:30 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

What is counter party risk and how exchange minimizes this risk through its margin system?
07
Q.1

What is derivatives? What are the types of derivative contracts?
07
Q.2

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
07

Share price of XYZ company on 5th September is Rs.500, risk free rate is per annum, Calculate the price for 25th November futures contract assume stock does not pay dividend during the maturity period.
07
OR

What is forward contract? Differentiate between forwards and Futures contract.
07
Q.3

What is options contract? Explain Factors affecting options premium.
07

Write a Short note on Moneyness of Options (ITM,ATM, OTM)
07
OR
Q.3

Explain Principles of put -call parity with hypothetical example.
07

What is risk management? Explain types of Risk.
07
Q.4

What is a commodity future? How farmers can hedge with the help of commodity futures? Illustrate with example.
07

Explain the perfect and imperfect hedging with suitable examples.
07
OR
Q.4

Write a Short note on Greek letters.
07

Tribhuwandas Bhimji Jewellers a gold jewellery manufacturer requires 1000 grams of Gold on July 1. On April The price of gold is INR 12,000 per gram. It plans to enter into a forward contract to buy gold, with the delivery date of July 1. It has estimated that the storage of this gold will cost INR 80000 and that it can invest its funds at elsewhere. Calculate the forward price of Gold on
April 1 for delivery on July 1.
07
Q.5

Using the following data, prepare the margin account of the investor. Assume that if a margin call is made at any time, the investor would deposit the amount called for.
Position Long
Contract Size 1000 units
Unit Price Rs.21
No. of contracts 10
Initial Margin 12
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Maintenance Margin 3/4ths of Initial margin
Date of Contract July 3
Closing Prices
Date
July 4
July 5
July 6
July 7
July 10
July 11
July 12
Price
22.30
23.10
22.90
23
23.15
22.85
22.95
Also calculate Gain/ Loss for Short futures
OR
Q.5
Infosys stock is selling at Rs. 1,130. There exists call option on Infosys with expiry in 60 days at an exercise price of Rs. 1,140. It is estimated that every 30 days' price would increase by or decrease by 4%. Risk free rate is 8%. Calculate price using two-period Binomial Option pricing model.
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