Question 1: A dealer has PKR 100 million and receives the following rates of foreign exchange from the market. Find out how dealer can earn maximum arbitrage profit in FX market transaction. Solve and explain step by step.(/5)

USD/PKR138/139

GBP/PKR199/201

GBP/USD1.2729/35

EURO/GBP 1.1520/33

Question: 2 following FX rates & interest rates(/10)

CURRENCY SPOT RATES

INTEREST RATES 3M (84 DAYS) (%)

INTEREST RATES 6M (181 DAYS) (%)

EURO/USD

1.0607/15

EUR 3 MONTH

0.02/0.04

EUR 6M

0.1/0.15

GBP/USD

1.5089/106

GBP 3 MONTH

0.25/0.30

GBP 6M

0.30/0.35

AUD/USD

0.7225/33

AUD 3 MONTH

1.05/10

AUD 6M

1.25/35

USD/JPY

122.55/72

JPY 3 MONTH

0.10/15

JPY 6M

0.15/20

USD/CNY

6.3920/45

CNY 3 MONTH

3.80/90

CNY 6M

4.10/20

USD/PKR

106.10/20

PKR 3 MONTH

5.90/00

PKR 6M

6.10/20

USD 3 MONTH

0.20/25

USD 6M

0.40/45

Calculate the Following:

1.3 month forward rate & swap points of Euro/AUD

2.3 Month forward points and 6 month forward points of JPY/PKR

Question: 3. You are treasurer of a bank, in your bank Advance to deposit ratio is high (70%), investment to deposit ratio is low (30%). You are expecting liquidity crunch due to COVID-19 therefore depositors will take out their cash from your bank and want to spend.(/5)

Required:

1. Elaborate in detail how you will handle situation.
2. List down the risk factors that your bank may face?
3. How bank should mitigate these risks?

Question: 4 Citi Bank in a short position, therefore Citi has done deal on spot-a-month for Rs 250 million withHBL Other information given below:(/5)

Issue Date

25-Sep-2019

Maturity Date

24-Sep-2020

Trade Date

02-MAR-2020 ( Thursday )

MTM (PKRV)

Given last page

Repo Rate

8.25/50

Calculate:

Find First & second Price (P1 & P2) & also in rupees, Deal / Days to Maturity, which bank involve in Repo & Reverse Repo Transaction?

Question: 5 UBL bank quote 12.56/52% for 150 million PIB 10 years to Askari Bank for forward 60 daysAskari bank yours to UBL.Other Information given below:( /5)

Issue Date

03-Sep-2013

Maturity Date

03-Sep-2023

Trade Date

25-April-2020

Coupon Rate

11.00% semi annually

CALCULATE:

1. Who will buy bond & at what rate
2. Accrued Days
3. Accrued Interest Amount
4. Clean Price
5. Dirty Price
6. TotalAmount

Question: 6. Dealer lent PKR 15,000,000 at 11.50% for 11 months (335 days) and forward rate (effective rate) for 4*11 (215 days) is 12.35%(/10)

Required:

1. What is your current borrowing rate for 4 months
2. How could you hedge your position
3. If the market is quoting 11.50/75 for 4vs11 at what rate will you deal.
4. If currently 6 month Kibor is 12% and 7 month Kibor is 12.50%, after 4month 6 Month Kibor is 11.25%, and7 month Kibor is 10.50%. How much FRA buyer & seller pay/receive.
5. What would be overall approximate profit & loss position of dealer after 4 Month

-------------------------------------*Good luck*-------------------------------------------------------------------------------------

PKRV Rates

0-7days

6.38

8-15days

6.47

16-30days

6.48

31-60days

6.48

61-90days

6.48

91-120days

6.49

121-180days

6.49

181-270days

6.54

271-365days

6.55