College of Administrative and Financial Sciences 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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