米货币银行学课件师家升

1、Chapter 13Financial Derivatives2HedgingHedge: engage in a financial transaction that reduces or eliminates riskBasic hedging principle:Hedging risk involves engaging in a financial transaction that offsets a long position by taking a short position, or offsets a short position by taking an additiona

2、l long position3The Basics: Defining DerivativesA derivative is a financial instrument whose value depends on (or is derived from) the value of some other financial instruments, called the underlying assets. The purpose of derivatives is to transfer risk from one person or firm to another. 4Forwards

3、 and FuturesA forward, or forward contract, is an agreement between a buyer and a seller to exchange a commodity or financial instrument for a specified amount of cash on a prearranged future date. Because they are customized, they are very difficult to resell to someone else a future, or a futures

4、contract, is a forward contract that has been standardized and sold through an organized exchange5Forwards and FuturesA futures contract specifies that the seller (called the short position) will deliver some quantity of a commodity or financial instrument to the buyer (called the long position ) on

5、 a specific date called the settlement or delivery date, for a predetermined price. No payments are made initially when the contract is agreed to. The seller/short position benefits from declines in the price of the underlying asset, while the buyer/long position benefits from price increases 6Forwa

6、rds and FuturesInstead of making a bilateral arrangement, the two parties to a futures contract each make an agreement with a clearing corporation A clearing corporation reduces the risk buyers and sellers face.7Forwards and FuturesMargin Accounts and Marking to Marketthe clearing corporation requir

7、es that both parties to a futures contract are required to place a deposit with the corporation itself.This practice is called posting margin in a margin account. The margin deposits serve as a guarantee that when the contract comes due, the parties will be able to meet their obligations 8Forwards a

8、nd FuturesHedging and Speculating with Futuresinsure against declines in the value of an asset. Futures contracts are popular tools for speculation because they are cheap. The fact is, an investor needs only a relatively small amount of investment (the margin) to purchase a futures contract that is

9、worth a great deal 9Forwards and FuturesArbitrage and the Determinants of Futures PricesThe practice of simultaneously buying and selling financial instruments in order to benefit from temporary price differences is called arbitrage, and the people who engage in it are called arbitrageurs. the futur

10、es price must move in lock step with the market price of the bond.10Forwards and Futures11Interest-Rate Forward MarketsLong position = agree to buy securities at future dateHedges by locking in future interest rate if funds coming in futureShort position = agree to sell securities at future dateHedg

11、es by reducing price risk from change in interest rates if holding bondsPros1.FlexibleCons1.Lack of liquidity: hard to find counterparty2.Subject to default risk: requires information to screen good from bad risk12Widely Traded Financial Futures Contracts13Widely Traded Financial Futures Contracts14

12、OptionsOptions are agreements between two parties. There is a seller, called an option writer, and a buyer, called an option holder. option writers incur obligationsoption holders obtain rights. Two basic options, puts and calls.15OptionsA call option is the right to buy “call away” a given quantity

13、 of an underlying asset at a predetermined price, called the strike price, on or before a specific date.A put option gives the holder the right but not the obligation to sell the underlying asset at a predetermined price on or before a fixed date. 1617OptionsThe likelihood that an option will pay of

14、f depends on the volatility, or standard deviation, of the price of the underlying asset 18Options19Profits and Losses: Options vs. Futures$100,000 T-bond contract,1. Exercise price of 115, $115,000.2. Premium = $2,00020Factors Affecting PremiumHigher strike price lower premium on call options and h

15、igher premium on put optionsGreater term to expiration higher premiums for both call and put options3.Greater price volatility of underlying instrument higher premiums for both call and put options21SwapsInterest rate swaps are agreements between two counterparties to exchange periodic interest rate

16、 payments over some future period, based on an agreed upon amount of principal(whats called the notional principal). The effect of this agreement is to transform fixed-rate payments into floating-rate payments, and vice versa.22SwapsUsers of interest-rate swaps government debt managers who find long

17、-term fixed-rate bonds cheaper to issue, but prefer short-term variable-rate obligations for matching revenues with expenses The second group uses interest rate swaps to reduce the risk generated by commercial activities 23Interest-Rate Swap Contract1.Notional principle of $1 million2.Term of 10 years3.Midwest SB swaps 7% payment for T-bill + 1% from Friendly Finance Co.24Hedging with Interest-Rate SwapsReduce interest-rate risk for both parties1.Midwest converts $1m of fixed rate assets to rate-sensitive as