Description
Assignment-3
Financial Derivatives (FIN405)
Deadline: (30/11/2024 @ 23:59 PM)
Course Name: Financial Derivatives
Course Code: FIN405
Student’s Name:
Semester: 1st
CRN: 12323
Student’s ID Number:
Academic Year: 2024-25 1st Semester
For Instructor’s Use only:
Instructor’s Name: Dr Jyoti Agarwal
Students’ Grade: /10
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• This assignment is an individual assignment.
• The Assignment must be submitted only in WORD format via allocated folder
on Blackboard.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented. This also
includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submitted assignments will NOT be entertained.
• Avoid plagiarism, the work should be in your own words, copying from
students or other resources without proper referencing will result in ZERO
marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, doublespaced) font. No pictures containing text will be accepted and will be
considered plagiarism).
Submissions without this cover page will NOT be accepted.
Assignment Questions
Q.1 On June 17 of a particular year, an American watch dealer decided to
import 100,000 Swiss watches. Each watch costs SF225. The dealer would like
to hedge against a change in the dollar/ Swiss franc exchange rate. The forward
rate was $0.3881. Determine the outcome from the hedge if it was closed on
August 16, when the spot rate was $0.4434.
(03)
Q.2 For a $100 million equity swap with semiannual payments and an initial
stock index level of 2000, one party pays a fixed rate of 5.5 percent assuming
30 days per month and 360 days in a year. On the first payment date, if the
stock index is at 2173, determine the net swap payment, and specify which
party makes the payment.
(03)
Q.3 Explain how a bank could use a swaption to hedge the possibility that it
will enter into a pay floating, receive-fixed swap at a later date.
(04)
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