Citi’s CEO visits Citi Australia’s head office in March, 2017

Citi’s CEO visits Citi Australia’s head office in March, 2017
Citi’s CEO visits Citi Australia’s head office in March, 2017. He finds that the manager of Citi’s MINI trading desk has recently resigned and asmall group of Sydney
University’s students are now running the trading desk. Shocked by this fact, the CEO immediately asks this group of students to send him a report, based on ALL MINI
products with Australian stocks as underlying assets. The purpose of this report is to convince the CEO that a group of students can run Citi’s MINI desk. Students do
not need report MINI products on other underlying assets. The website for these products is: https://au.citifirst.com/EN/search/MINIs

1. What are MINIs? How are MINI products priced? What are the maturity dates of MINI products?

2. For each underlying stock, does Citi provide both long and short MINIs? If for some underlying asset the answer is no, explain why Citi cannot provide both long and
short MINI products.

3. How to determine strike prices or strike price range for MINIs?

4. Does put-call parity hold or approximately hold for Citi’s MINI products?

5. For each underlying stock, check whether ASX provide call/put option products. Asx.com.au or any trading platform (Nabtrade, Commsec, etc.) will be a good source to
check it.

6. Compare Citi’s MINI products to ASX’s option products. What are the typical daily trading volume range? What are the typical bid/ask units? Can you see obvious
differences between Citi’s MINI and ASX’s option with respect to their bid/ask market depth and trading volume?

7. What are the deltas of MINI products?

8. Can traders short all the underlying stocks for MINI products? Asx.com.au or shortman.com.au will be a good source to check it.

9. Citi makes market for all of its MINI products. How to hedge Citi’s risk? Is this risk high if Citi conducts 50% delta hedge? 50% delta hedge means Citi only
buy/sell 50% units of underlying asset required for delta hedge. Results will be acceptable if assumptions and data/estimates/calculation are reasonable.

10. Is it possible that call/put stock option trading activity impacts the trading activity and stock price of the underlying? If yes, can you provide one example? If
no, explain why.

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