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Forex Margin
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answered on 13-May-23 10:11
Hi, in illustration 86 why do we not deduct margin on first working of customer for initial contract?
latest answer
only if the contract rates are given as spot / forward quotation do we add/subtract margin - else it is assumed that margin is already included in the value. The exact language used in the question is " entered into a forward purchase contract for.... on ... with customer for 3 months @ rate of ₹ 59.60" - here the contract rate is already provided and hence we cannot add margin. Say the question says the forward rate quoted in the market is is ₹ 59.6 - bank enters into contract with customer at this rate - then you can add / subtract margin
Lalit Sanpal
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answered on 29-Apr-23 18:50
illustration 88 Dont we require to add marign to 63.7275 -the new forward contract rate? at time 7.44 also what does this 2nd question amount payable on usd 1 lak means? does it mean cancellation charges or exchange loss?
latest answer
Yes - i explained the margin part at 17min . 40 sec - pls go through the problem fully Secondly, on what is the amount payable on 1lac USD, it could mean the total amount payable including the cost of the new contract and gain loss on cancellation, etc 63.79 x 100000 + 93282 or it could mean cancellation gain loss as in part 1 they have asked only cancellation rate but not total cancellation amount
nazriya nasar
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answered on 25-Apr-23 13:15
illustration 68 at time 4.47 sir can u plz explain the logic of that formulae 1.06*1.03-1 i understood that USD has appreciated and all...just need to know logic of fomulae
latest answer
removing the initial amount.
nazriya nasar
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answered on 23-Apr-23 21:55
illustration 63 (a) what does this average spot rate means? average of bid and ask?
latest answer
yes
nazriya nasar
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answered on 22-Apr-23 11:06
illustration 56 on sep 1 2009 the spot rate is 0.02133 and currency future rate is s0.02134. what are these 2 different rates meant? whats the difference? we used 0.02133 on sport purchase and 0.02134 in net gain calulation, why?
latest answer
The spot is for delivery on the T+2 settlement The forward rate is the rate between one entity and usually a bank in case of a forex transaction - forwards can be for month-end dates on in-between dates also known as broken dates - these contracts are usually delivery based future rates are rates usually for month-end contracts that are traded on exchange - here it can be between any two parties, buying and selling futures contracts on exchange - such contracts are usually net settled The question asks us to compare 3 options for the first option forward contract we use the forward contract rate - 0.02127 for send option futures we use sep future contract rate as on June 1 0.02118 to enter into the contract. The contract is canceled / squared off at 0.02134. once this gain/loss is computed - one has to enter into a spot transaction at the spot rate on Sep 1st which is clearly given as 0.02133 3rd option is no hedging in which case a spot rate of 0.02133 is used
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answered on 21-Apr-23 17:34
illustration 54 why is the cost of funds only on upfront premium?
latest answer
because we are computing all inflows and outflows at a point in time and not over a period of time. SO if we are comparing various options over diff points in time, it does not make sense. All options should be for the same point in time. So if all other options are for the Future date and one option is for the present date. we will add cost of funds to the option which is computed for present date in order to make it comparable to other options which are for future date
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Portfolio Management - Illustration 7
AFM
answered on 19-Apr-23 07:33
Hello Sir, In the Illustration 7, we are comparing the return as per CAPM and Expected return, but isnt the return as per CAPM is the expected return. Should we compare the CAPM return with the market return to decide on the investment?
latest answer
Think of it as Theoretical vs. Estimated
Suresh Avinash
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answered on 18-Apr-23 17:13
illustration 39 sub question i , sir why are we comparing estimated rate with current spot? anyway amount is receivable on 31st aug...so whats the point in comparing spot rate and estimate on 31st aug? comparison should be between estimate and forward arte quoted right?
latest answer
Because in one scenario we are comparing a scenario where no hedging is done - if hedging is not done forward rate is not relevant right?
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answered on 17-Apr-23 13:04
illustration 33 question says bank has surplus fund of 7 lak...so what does this "cost of fund to bank is 6%" meant?
latest answer
Okay sir.. Its clear.. Thankyou
nazriya nasar
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answered on 17-Apr-23 13:05
illustration 30 at 12.17minute sir why are we multiplying 1st 3 month rate to next 3 month rate? we have add it right?
latest answer
Okay. Sir clear... Thankyou
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