Financial Treasury & Forex Management for CS EXAMS

Financial, Treasury and Forex Management Š Tharun Raj 2.

Number

of

Index

contract

(Buy

or

Sell)

=

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12.

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3. Value of Call Option ďƒ C = S + P – PV of Exercise price

ď ˘=

ď łs x cor (s, m) ď łm

13.

Return of a security (CML) = R f 

ď łs  R  Rf ď łm m

4. Value of Put Option ďƒ P = C + PV of Exercise price – S

14.

5. Difference Between Spot Price (MP) and Strike Price (SP) Known as Intrinsic value

15. Risk return trade off =

6. Time value of option = Total Value of Option - Intrinsic value

16. Equation Of Characteristics Line: Y = ι + β x X

[Known as Extrinsic value]

Îą = Average of difference in returns



Return of a security (SML) = R f  β  R m  R f  đ?‘…đ?‘š − đ?‘… đ?‘“ đ?œŽđ?‘š

= Actual return – Expected return 7. Black and scholes model:

FOREX MANAGEMENT 1. Indirect Quote = 1/ Direct Quote

5. Bid Swap = Difference between Forward Bid & Spot Bid Ask Swap = Difference between Forward Ask & Spot Ask

2. Spread: Difference between the bank’s buying rate (Bid rate) and the bank’s selling rate (Ask rate) is called the Spread.

6. (1 + r h) / (1 + r f) = Forward rate / Spot rate ďƒ Interest rate parity

3. Bid (Rs/$) = 1 / Ask ($/Rs.)

7. (1 + lh) / (1 + lf) = Forward rate / Spot rate ďƒ Purchase power parity

Ask (Rs/$) = 1 / Bid ($/Rs.) 4. Formula: % of Appreciation / Depreciation (F−S) S

X

12 m

X 100 www.learnlabz.com

Commodity =

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