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Settlement
AFM
answered on 14-Jun-24 16:08
Hi sir, In case of futures we should do net settlement right sir ? But why in this question we are doing delivery in part 3 and part 4.
latest answer
Unless they specify Exchange traded - pls assume the market refers to OTC only
B. Dinesh
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Margin given as absolute values
AFM
answered on 13-Jun-24 21:55
Hi sir, in case of margin is given as absolute number for eg, 20 paisa. then where to add it at INR quote i.e. USD/INR or final quote CHF/INR ?
latest answer
In real world all margins are added to USD INR But icai has its own take on this Chapter 10 - page 10.75 https://resource.cdn.icai.org/77516bos62312.pdf
B. Dinesh
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Rounding off
AFM
answered on 13-Jun-24 16:11
Hi sir, In illustration no.90 they did not mention anything about Rounding off but we rounded off to nearest multiple of 0.0025, but in this illustration we are not doing rounding off. SO in exam if the question is silent about Rounding off What we should we do ? Should we round off or not ? or In illustration 90. they gave margin, but in this question there is no margin. So does the round off assumption anyway depends on margin ?
latest answer
Per FEDAI rules, you can round off to 0.0025 Margin and round off are independent Usually, they ask you to round off If they do not mention round off, please round off till 4th digit i.e show four numbers after decimal.
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Cancellation of forward from bank's perspective
AFM
answered on 14-Jun-24 05:21
Hi sir, Can i solve the part B by assuming ' i will instruct to bank to cancel the 2 month forward on day 0 itself'. Then bank will cancel the forward by charging us the money, the cancellation charges will be same i.e. 45,000 . But we will pay this on day 0 itself. So we should calculate interest for 3 months for cash flow purpose. Is this approach correct sir ?
latest answer
You cannot give instructions for future cancellations Cancel today or cancel in future If u cancel today, then today’s rate is applicable
B. Dinesh
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Early delivery
AFM
answered on 12-Jun-24 06:03
Hi sir, to have interest loss you said money inflow and outflow at different times. Does different times means different dates? or a day different from maturity date ? Bcz in this question we compared 65.40 lakhs with 65.22 lakhs to find out the interest loss. But both the transactions entered on same day , so cashflows will also happen on same day.
latest answer
Interest arises, when there is a cash inflow / outflow at a time different than what was originally agreed upon. Also, a suggestion - please watch a topic fully and ask questions, instead of asking questions at every step - a lot of your queries will get automatically resolved if you watch the full topic
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Interest
AFM
answered on 11-Jun-24 21:34
Hi sir, even in the previous question i.e. early delivery the contracts are entering on the same day i.e 28th Nov, so cashflows will also happen on the same day right. But there we computed interest here we do not . If it is early cancellation, then we should compute the interest till the maturity date na sir ?
latest answer
In case of early delivery it is Int + Swap In case of early cancellation it is only Cancellation gain / loss. given in table in page 158 of T 380 + compiler and explained in class too https://1fin.link/resource/c631ed476165487eb04b4477ae3986e3/0e66c9384d4a4c1e8145ccb5c2e6a389
B. Dinesh
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Interest on difference in outflow and inflow
AFM
answered on 11-Jun-24 20:29
Hi sir, there will be some difference in cash outflow and inflow for the forward contracts also right. Even though the cash flow may come on 31st dec, since we entered in forwards on01st oct & 28th Nov itself, we know the rates and we can calculate the difference in cash inflow and outflow . So Why don't we recover this interest loss also from customer ? If we do not recover bank has to bear it, instead Bank could have recover directly from customer na sir
latest answer
In real world Transactions are entered into 2 days in advance as we have T +2 settlement. For ICAI exam purposes, we assume that all transactions and actions happen on a single day there settlement is T + 0, else computations will become even more complicated that they already are
B. Dinesh
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fate of forwards table
AFM
answered on 11-Jun-24 18:46
Hi sir, please share the full table . In notes only the main table is give. attaching the notes for your reference.
latest answer
Pls check latest notes on website. Full table available in t380+ book
B. Dinesh
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Draft on London cancelled affect on Exchange position
AFM
answered on 11-Jun-24 13:50
Hi sir, When DD purchased we added to Exchange position, so if we sold DD/ cancel DD we should reduce from exchange position. But when we cancelled the draft on London we added to exchange position. What is the difference between Cancelling/ selling DD and Cancelling draft on London?
latest answer
Here when a draft on London is cancelled we are referring to a draft issued by us being cancelled DD bought is DD issued by some one else purchased by the bank
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462
Unhedged portion
AFM
answered on 11-Jun-24 11:37
Hi sir, In this question for unhedged portion in options, we considered spot instead of forward. So if they did not say anything wrt to unhedged portion should we take which ever is beneficial to us ?
latest answer
If something is unhedged it means it is open and no derivative contract has been entered into for this quantum of exposure. Hence you have to necessarily take due date spot for unhedged exposure
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