任务1-09一级基础班-衍生产品

2-109工作

：金程教育金融

CFA/FRM高级培训师教育背景：

财经大学国际经济学学士、澳大利亚

大学管理学学士工作背景：学术功底深厚、培训经验丰富，曾任课AFP、CFP多年，参与教学研究及授课，现为金程教育CFA/FRM双证培训老师，担任CFA项目学术研发 ，对CFA教学产品的研发工作负责，曾亲自参与中国工商银行总行、中国银行总行、杭州联合银行等CFA、FRM培训项目。累计

达4000小时，课程清晰易懂，深受学员欢迎。服务客户：中国工商银行、中国银行、中国建设银行、杭州联合银行、杭州银行、国泰君安、综合开发、中国CFP标准

、太平洋保险等主编：参与金程CFA项目参考书目的编写工作，包括金程CFA一级中文Notes等Topic

Weightings

in

CFA

Level

ISession

NO.ContentWeightingsStudy

Session

1Ethics

&

Professional

Standards15Study

Session

2-3tative

ysis12Study

Session

4-6Economics10Study

Session

7-10Financial

Reporting

and

ysis20Study

Session

11Corporate

Finance7Study

Session

12Portfolio

Management7Study

Session

13-14EquityInvestment10Study

Session

15-16Fixed

e10Study

Session

17Derivatives5Study

Session

18Alternative

Investments43-109FrameworkDerivatives4-109SS17

DerivativesR57

Derivative

Markets

andInstrumentsR58

Basics

ofDerivativePricing

and

ValuationR59

Risk

ManagementApplications

of

OptionStrategiesReading57Derivative

markets

and

instruments5-109Framework6-109R57：Derivative

markets

and

instruments基本概念Derivative的定义四大类衍生产品介绍衍生产品分类Exchange-traded

&

Over-the-counter的区别Forward

commitment

&

Contingent

claim的区别Derivatives

underlyingDerivatives的优缺点Risk

free

arbitrage四大类产品ForwardFuturesSwapOptionDerivative

Markets

and

InstrumentsDefinition:

A

derivative

is

a

financial

instrument

(contract)

that

derives

itsperformance

from

the

performance

of

an

underlying

asset.Buy

or

Sell

Something:Buy

or

Sell

nowBuy

or

Sell

sometime

in

thefuture.Example：3个月后→3￥/瓶价格→买果汁；3个月后→15￥/股价格→买

；3个月后→4%利息→借￥1million；3个月后→：合约Y/USD→换CNY.规避风险Hedge

vs.赚钱Speculate合约收益取决于约定的资产价格变化7-109Derivative

Markets

and

InstrumentsForwardcontract:A

forward

contract

is

an

private

agreement

that

obligates

one

party

tobuy

and

the

other

partyto

sell

a

specific ty

of

an

underlying

asset,at

a

set

price,

at

a

future

date约定未来特定时间以约定价格

标的物的合约.If

the

future

price

of

the

underlying

assets

increase,

the

buyer

hasagain,

and

the

seller

has

aloss.Forward

contractFutures

contractSwap

contractOption

contract8-109Derivative

Markets

and

InstrumentsA

Futures

contract

is

a

forward

contract

that

is

standardized

andexchange-traded.A

forward

contractAre

regulatedBacked

by

a

clearinghouseRequire

a

daily

settlement

of

gains

and

losses.Forward

contractFutures

contractSwap

contractOption

contract9-109Derivative

Markets

and

InstrumentsA

Swap

contract

is

a

series

of

forward

contracts

.Exchange

cash

flows

on

period

settlement

datesDefault

riskForward

contractFutures

contractSwap

contractOption

contract10-109Derivative

Markets

and

InstrumentsAn

option

contract:The

owner

has

the

right,

but

not

the

obligation

to

conduct

atransaction四种contract中只有option权利义务不对等要交

费Forward

contractFutures

contractSwap

contractOption

contract11-109Derivative

Markets

and

InstrumentsBasic

characteristics

of

optionsAn

option

to

buy

an

asset

at

a

particular

priceis

termed

a

calloptionBuyer

of

a

c to

buySeller

of

a

call Obligation

to

sellAn

option

to

sell

an

asset

at

a

particular

price

is

termed

a

put

optionBuyer

of

a

putRight

to

sellSeller

of

a

putObligation

to

buyForward

contractFutures

contractSwap

contractOption

contract12-109Derivative

Markets

and

Instruments13-109衍生品分类方法根据合约特点分类：Forward

commitment

&

ContingentclaimForward

commitment:

is

an

agreement

between

two

parties

inwhich

one

party,

the

buyer,

agrees

to

buy

from

the

other

party,

theseller,

an

underlying

asset

at

a

future

date

at

a

price

established

atthe

start

→

forward,

futures

and

swapcontractsContingent

claim:

is

derivative

in

which

the

payoffs

occur

if

a

specificevent

happens

→

option

contractsDerivative

Markets

and

Instruments衍生品分类方法根据交易场所分类：Exchange-traded

&

Over-the-counter

tradedExchange-traded：在一个固定的交易所交易。多空双方不直接见面，与 所交易（A→

Clearinghouse

→

B）OTC

traded：没有固定交易场所，多空双方直接交易（A→B）两种交易区别：Exchange-tradedOver-the-counterStandardized→

LiquidCustomized/Specific

needsBacked

by

a

clearinghouseTrade

with

counterparty

(default

risk)Trade

in

the

a

physical

exchangenot

trade

in anized

marketsRegulatedUnregulated14-109Derivative

Markets

and

Instruments15-109主要术语：Forward

commitmentLong：指买标的物Short：指卖标的物Contingent

claimLong：指获得一个权利Short：指卖出一个权利Call：指买入标的物的权利Put：指卖出标的物的权利Derivative

Markets

and

Instruments衍生品分类方法根据合约特点分类Forward

commitmentforwardfuturesswapoptionContingent

claimCDS根据交易场所分类Exchange-tradedOver-the-counter

tradedforwardswapoptionfuturesoption16-109ExampleWhich

of

the

following

is

the

best

example

of

a

derivative'?A

global

equity

mutual

fundB. A

non-callableernment

bondC. A

contract

to

purchase

Apple

Computer

at

a

fixed

priceCorrect

answer:

CWhich

of

the

following

statements

about

derivatives

is

not

true?They

are

created

in

the

spot

market.They

are

used

in

the

practice

of

risk

management.They

take

their

values

from

the

value

of

something

else.Correct

answer:

A17-109Example18-109The

buyer

of

a

call

option

has

the:right

to

buy

the

underlying

asset

in

the

future

under

certainconditionsobligation

to

sell

the

underlying

asset

in

the

future

under

certainconditionsright

to

sell

the

underlying

asset

in

the

future

under

certainconditionsCorrect

answer:

AA

private

agreement

between

two

parties

to

exchange

a

series

of

futurecash

flows

with

at

least

one

of

the

two

series

of

cash

flows

determinedby

a

later e,

is

best

characterized

as

a(n):SwapFutures

contractExchange-traded

contingent

claimCorrect

answer:

ADerivative

Markets

and

Instruments19-109Advantage:Price

discoveryRisk

management:

hedge

and

speculationLowering

transaction

costsLow

capital

requirementGreater

liquidityEase

of

going

shortEnhance

market

efficiencyDisadvantage:Too

risky

→

High

leverageComplex

instrumentsSometimes

likened

to

gambling考点：Always

increase

risk?

→No.Derivative

Markets

and

InstrumentsRisk-free

arbitrage

and

no-arbitrage

rule:Arbitrage

involves

earnin er

the

risk-free

rate

with

no

risk

or

earningan

immediate

gain

with

no

future

liabilitiesArbitrage

opportunities:

arbitrage

occurs

when

equivalent

assets

orcombinations

of

assets

sell

for

two

different

pricesLaw

of

one

price:

two

securities

or

portfolios

that

have

identical

cashflows

in

the

future,

regardless

of

future

events,

should

have

the

sameprice20-109Derivative

Markets

and

Instruments21-109Risk-free

arbitrage

and

no-arbitrage

rule

(Cont.):The

way

of

arbitrage:

sell

high,

buy

lowIf

a

portfolio

consisting

of

A

and

B

has

a

certain

payoff,

the

portfolioshould

yield

the

risk-free

riskThe

role

of

arbitrage

is

to

eliminate

mispricing

and

lead

to

the

marketefficiency.

That

is

why

arbitrage

also

plays

a

role

in

pricing.Derivative

Markets

and

Instruments22-109Arbitrage

pricing

restrictions：restrict

sell

short

systemlimit

the

amount

of

arbitragetransaction

costExampleWhether

these

two

rules

below

can

restrict

the

price

discover

functionof

the

market?23-109Restrict

sell

short

systemyesyesnolimit

the

amount

of

arbitrageyesnoyesCorrect

answer:

ASellshort和arbitrage可以促进市场有效定价，加以限制将影响市场功能.ForwardDefinition:

A

forward

contract

is

a

bilateral

contract

that

obligates

onety

of

an

underlyingparty

to

buy

and

the

other

party

to

sell

a

specificasset,

at

a

set

price,

on

a

specific

date

in

the

futureLongand

short

forward

positionLong:

buy

underlyingShort:

sell

underlyingNo

payments

will

be

made

at

the

inception

of

a

forward

contract.

Soboth

parties

of

a

forward

contract

is

exposed

to

potential

defaultrisk24-109Forward25-109Forward

contracts分类：Commodity

forward

contract：商品远期合约Financial

forward

contract

：金融远期合约Purposes

of

trading

forward

contracts：Hedge

risk：套期保值，锁定未来交易成本，但不保证一定比不实施套期保值赚钱。存在default

risk。Speculation：投机，赌未来价格的变化方向。Characteristics

of

Forward

contracts

：Each

party

are

exposed

to

default

risk

(

or

counterparty

risk).Zero-sum

game.Forward成本，多用于商Settling

a

forward

contract

at

expirationPhysical

settlement:deliver

an

actual

asset，存在品远期Cash

settlement:the

party

that

has

a

position

with

negative

value

isobligated

to

pay

that

amount

to

the

other

party，多用在金融远期Settling

a

forward

contract

prior

to

expirationEntering

into

an

opposite

forward

contract:

with

an

expiration

dateequal

to

the

time

remaining

on

the

original

contractOffsetting

with

a

different

party:

some

creditrisk

remainsOffsetting

with

the

original

party:

can

avoid

credit

risk26-109ExampleWhich

is

the

most

common

way

to

terminate

a

forward

contract

priorto

expiration?Cash

settlementEnter

into

an

opposite

contractDelivers

the

actual

instrumentsCorrect

answer:

BHow

to

eliminate

the

risk

on

a

forward

contract:enter

a

opposite

trade

with

same

counterparty

at

same

priceenter

a

opposite

trade

with

different

counterparty

for

any

priceenter

a

opposite

trade

with

same

counterparty

for

any

priceCorrect

answer:

A27-109Forward28-109LIBOR,

Euribor,

and

FRAsEurodollar

time

deposit.London

Interbank

Offer

Rate

(LIBOR).USD

interest

rates.Quoted

as

an

annualized

rates

based

on

a

360-day

a

yearAdd-on

rateSingle

interestEuribor

is

a

similar

rate

for

borrowing

and

lending

in

EurosA

forward

rate

agreement

(FRA)

is

a

forward

contract

on

an

interest

rate(LIBOR)Forwardnow90settlement

orexpiration270LIBOR,

Euribor,and

FRAs（续）FRA定义：An

FRA

can

be

viewed

as

a

forward

contract

to

borrow/lendmoney ertain

rate

at

some

future

date.The

long

position:

is

the

party

that

would

borrow

the

moneyThe

short

position:

is

the

party

that

would

lend

the

moneyFRA期限.常见期限：30、60、90、120天LiborOff-the-run

FRA：非标准周期如45天Libor报价：Example

3×9FRA90-day

FRA

180-dayLIBOR29-109Forwardnow90270LIBOR,Euribor,and

FRAs（续）=Long

90-day

FRA

on

180-day

LIBORnow90270Long

270-day

Eurodollarnow90270Short

90-dayEurodollar=Synthetic

long

90-day

FRAon

180-dayLIBOR30-109ForwardLIBOR,

Euribor,and

FRAs（续）交割：settle

in

cash,

but

no

actual

loan

is

made

at

the

settlement

datePayoff定性分析：If

the

reference

rate

at

the

expiration

date

is

above

the

specifiedcontract

rate,

the

long

will

receive

cash

payment

from

the

short;If

the

reference

rate

at

the

expiration

date

is

below

the

contract

rate,the

short

will

receive

cash

payment

from

the

longPayoff定量分析Notional

principalFloating

rate

at

settlement-forward

rate

days

360

1+Floating

rate

at

settlement

days36031-109ExampleWhich

of

the

following

best

describes

the

forward

rate

of

anFRA?The

spot

rate

impliedby

the

term

structureThe

forward

rate

implied

by

the

term

structureThe

rate

on

a

zero-coupon

bond

of

maturity

equal

to

that

of

thefor-ward

contractCorrect

answer:

BThe

underlying

asset

of

FRA

isBondStockInterest

rateCorrect

answer:

C32-109Futures定义：A

futures

contract

is

an

agreement

that

obligates

one

party

tobuy

andthe

other

party

to

sell

a

specificprice,

at

a

future

date.与forward

contract相似点:ty

of

an

underlying

asset,

at

a

setCan

be

either

deliverable

or

cash

settlement

contracts;Deliverable

contracts

obligate

the

long

to

buy

andthe

short

to

sella

certain ty

ofan

asset

for

acertainpriceon

a

specified

futuredate.Cash

settlement

contracts

are

settledby

paying

the

contract

valuein

cash

on

the

expiration

date.Are

priced

to

have

zero

value

at

the

time

an

investor

enters

into

thecontract.33-109Futures34-109与forward区别:ForwardsFuturesPrivate

contractsExchange-tradedUnique

customized

contractsStandardized

contractsLittle

or

no

regulationRegulatedDefault

risk

is

presentGuaranteed

by

clearinghouseSettlement

at

maturityDaily

settlement

(mark

to

market)No

margin

deposit

requiredMargin

required

and

adjustedFuturesStandardization：Futures

contracts

specify

the

quality

andty

of

goods

that

canbedelivered,

the

delivery

time

and

the

manner

of

delivery.ClearinghouseEach

exchange

has

a

clearing

house

that

guarantees

that

tradersinthe

futures

market

will

honor

their

obligations.A

clearinghouse

acts

as

the

counterparty

to

each

participant.

Theclearinghouse

is

the

buyer

to

every

seller

and

the

seller

to

every

buyer.There

is

no

need

to

worry

about

the

counterparty

defaultrisk.Clearinghouse

allows

either

side

of

the

trade

to

reverse

positions

atafuture

date.35-109Futures36-109Futures

contract风险控制方法Margin;Daily

Price

Limit;Marking

to

market.FuturesFutures

contract风险控制方法方法一：Margin:Initial

margin:

Thedeposit

is

called

the

initial

margin.

Initialmargin

must

be

posted

before

any

trading

takes

place;Maintenance

margin:

If

the

margin

balance

in

the

trader's

accountfalls

below

the

maintenance

margin,

the

trader

will

get

a

margin

callVariation

margin:

used

to

bring

the

margin

balance

back

up

to

theinitial

margin

level.37-109Futures例题:Initial

margin=$5/contract,

maintenance

margin=$2/contract,long

20

contractDayBeginningbalanceFundsdepositedFuturespricePricechangeGain/LossEndingBalance001008210011000842401402140078-6-120203208073-5-1000401007961202205220082360280628008424032038-109FuturesFutures

contract风险控制方法（续）Margin

（续）

:与 市场Margin的比较marginmargin目的做抵押减少违约风险借钱给你买

，举杠杆现金流方向现金流出现金流入支付利息不用支付利息相当于

给你，要付利息补交margin数额回到initial

margin回到maintenance

margin39-109ExampleDo

“margin”

in

the

stock

market

and

“margin”

in

the

futures

market,respectively,

mean

that

an

investor

has

received

a

loan

that

reduces

theamount

of

his

own

money

required

to

complete

the

transaction?Correct

answer:

CA

futures

trader

must

keep

the

money

in

the

margin

account

above

the:initial

margin

requirementvariation

margin

requirementmaintenance

margin

requirementCorrect

answer:

C“Margin”

in

the

stock

market“Margin”

in

the

future

marketANoNoBNoYesCYesNo40-109FuturesFutures

contract风险控制方法（续）方法二：Daily

Price

Limit涨 机制:Price

limits

are

exchanged-imposed

limits

on

how

much

thecontract

price

can

change

from

the

previous

day’s

settlement

price;Limit

move:

If

traders

wish

to

trade

at

prices

outside

these

limit---no

trades

will

take

place.---thesettlement

pricewill

be

reportedupper

or

lower

pricelimitsLocked

limit:

if

trades

cannot

take

place

because

of

a

limit

move,either

up

or

down,

the

price

is

said

to

be

locked

limit,

since

notrades

can

take

place

and

traders

are

“locked”

into

their

existingpositions.方法三：Marking

to

market：The

margin

requirement

of

a

futurescontract

is

low

because

at of

every

day

there

is

a

dailysettlement

process

called

marking

to

market41-109Example42-109Which

of

the

following

statements

about

futures

contracts

is

FALSE?The

futures

clearinghouse

allows

traders

to

reverse

their

positionswithout

having

to

contract

the

other

side

of

the

initial

trade.To

safeguard

the

clearinghouse,

the

exchange

requires

traders

topost

margin

and

settle

their

accounts

on

a

weekly

basis.Offsetting

trades

rather

than

exchanges

for

physicals

are

usedtoclose

most

futures

contracts.Correct

answer:

BWhich

of

the'

following

occurs

in

the

daily

settlement

of

futurescontracts?Initial

margin

deposits

are

refunded

to

the

two

parties.Gains

and

losses

are

reported

to

other

market

participants.Losses

are

charged

to

one

party

and

gains

credited

to

the

other.Correct

answer:

CSwapCharacteristics

of

Swap

ContractsSwap

contract

:

A

swap

contract

obligates

two

parties

to

change

a

series

of

cash

flows

on

periodic

settlement

dates

over

a

certain

timeperiod.与Forward相似点:No

payment

required

by

either

party

at

initiation

except

theprincipal

values

exchanged

in

currency

swaps.Custom

instruments.Not

traded

in

any anized

secondary

market.Largely

unregulated.Default

risk

is

a

critical

aspect

of

the

contracts.Institutions

dominate43-109Swap44-109Three

types

of

swap

contracts-

Interest

Rate

SwapsThe

plain

vanilla

interest

rate

swap

involves

trading

fixed

interest

rate

payments

for

floating-rate

payment

(

paying

fixed

and

receivingfloating

).Counterparties:

The

parties

involved

in

any

swap

agreement

arecalled

the

counterpartiesPay-fixed

side:

The

counterparty

that

wants

variable-rate

interestagrees

to

payfixed-rateinterest.Pay-floating

side:

The

counterparty

that

receives

the

fixed

paymentand

agrees

to

pay

variable-rate

interest.SwapThree

types

of

swap

contracts-

Interest

Rate

SwapsThe

Comparative

Advantage

ArgumentAAA

Corp:

wants

to

borrow

floatingBBB

Corp:

wants

to

borrow

fixed.AAA

Corp：LIBOR，节省0.3%BBB

Corp：11%，节省0.2%FixedFloatingAAA

Corp10.00%6-month

LIBOR

+

0.30%BBB

Corp11.20%6-month

LIBOR

+

1.00%AAA

CorpBBB

Corp10%LIBOR10%45-109LIBOR+1%OptionBasic

ConceptsOption定义：An

option

gives

its

owner

the

right,

but

not

the

obligation,to

buy

or

sell

an

underlying

asset

on

or

before

a

future

date(theexpiration

date)

at

a

predetermined

price

(the

exercise

price

or

strikeprice)Call

option：Long

call

&

Short

callPut

option：Long

put

&

short

putThe

seller

or

short

position

in

an

options

contract

is

sometimesreferred

to

as

the

writer

of

the

option价格：价格：option

premium

paid

by

the

buyer

of

option;执行价格：Strike

price(X)

represents

the

exercise

price

specified

inthe

contract.46-109OptionCredit

default

swaps

(CDS)

is

essentially

an

insurance

contract

for

thereference,

the

reference

obligation

is

the

fixed e

security

on

which

theswap

is

written-usually

a

bond

but

potentially

also

a

loan.Protection

buyer

receives

a

payment

from

the

protection

seller

if

defaultoccurs

on

the

reference

entity.The

protection

buyer

pays

the

seller

a

premium.

The

default

swappremium

is

also

referred

to

as

the

CDS

spread.Credit

spread

option:

a

call

option

that

is

based

on

a

bond’s

yield

spreadrelative

to

a

ben

ark.If

the

bond’s

credit

quality

decreases,

its

yield

spread

will

increaseThe

bondholder

will

collecta

payoff

on

the

option.Credit-linked

note：The

credit

protection

buyer

holds

a

bond

or

loan

thatis

subject

to

default

risk

(the

underlying

reference

security)

and

issues

itsown

security

(the

credit-linked

note)if

the

bond

or

loan

it

holds

defaults,

the

principal

payoff

on

the

credit-linked

note

is

reduced

accordingly.47-109Option48-109Moneyness（价值状态）:定性看long是否赚钱Moneyness：In

the

money:

Immediate

exercise

would

generate

a

positive

payoffAt

the

money

:

Immediate

exercise

would

generate

no

payoffOut

of

the

money

:

Immediate

exercise

would

generate

no

payoffThe

following

table

summarizes

the

moneyness

of

options

based

on

thestock's

current

price,

S,

and

the

option's

exercise

strike

price,X.MoneynessCall

optionPut

OptionIn-the-moneyS＞XS＜XAt-the-moneyS

=XS

=XOut-the-moneyS＜XS＞XOptionPayoffPayoffPayoffSTSTKKPayoffPayoffSTSTKK49-109OptionGain/LossProfitProfitSTSTXXProfitProfitSTSTXX50-109OptionIntrinsic

Value（内在价值）

:定量看long赚Intrinsic

Value:

the

amount

that

it

is

in

the

money,

and

zero

otherwiseIntrinsic

value

of

call

option:

C=max[0,

S-X]Intrinsic

value

of

put

option:

P=max[0,

X-S]TimeValue:The

difference

between

the

price

of

an

option

(called

its

premium)and

its

intrinsic

value

is

due

to

its

time

valueOption

value=intrinsic

value

+

time

value到期日之前：option

value>intrinsic

value到期日：option

value=intrinsic

valuePrice

of

the

option

is

more

volatile

than

prices

of

underlying

stock51-109ExampleAn

investor

purchases

an

equity

call

option

pricedat

CHF3

with

anexercise

price

of

CHF41.

If

at

expiration

of

the

option,

the

underlying

ispriced

at

CHF38,

the

profit

for

the

investor's

position

is

closestto:–CHF6.CHF0.–CHF3.Correct

Answer:

CThe

option

expires

worthless,

and

the

loss

is

equal

to

the

premiumpaid.52-109ExampleWhich

of

the

following

statements

about

call

options

at

expiration

isTRUE?The

profit

potential

to

the

buyer

of

the

option

is

unlimited.B. The

call

buyer'sum

loss

is

the

call

option's

premium.C. All

of

the

answers

are

correct.Correct

answer:

CWhich

of

the

below

positions

is

the

most

risky,

in

the

sense

of

havingthe

largest

potential

losses?A

long

position

in

call

options.A

short

position

in

put

options.A

short

(written)

position

in

call

options.Correct

answer:

C53-109Example54-109Consider

a

put

option

on

Deter,

Inc.,

with

an

exercise

price

of

$45.

Thecurrent

stock

price

of

Deter

is

$52.

What

is

the

intrinsic

value

of

the

putoption,

andis

the

put

optionat-the-money

orout-of-the-money?MoneynessAt-the-moneyOut-of-the-moneyAt-the-moneyIntrinsic

Value$7$0$0Correct

answer:

BWhich

statement

about

option

valuation

is

FALSE?Prior

to

maturity,

out-of-the-money

options

have

no

value.The

value

of

an

option

is

its

time

value

plus

its

intrinsic

value.The

buyer

of

a

call

option

contract

can

never

lose

more

than

theinitial

premium.Correct

answer:

AOptionPut

call

parityPut

call

parity.55-109或c

K

/

1f

R

S

pTPositions

replicatingCondition

ACondition

BCondition

CCondition

DCondition

ETfc

X

/

1

R

S

pp

c

X

/

1f

R

STc

p

S

X

/

1

RfT

p

c

S

X

/

1

Rf

Tc

p

X

/

1

Rf

ST

Tfs

c

p

X

/

1

ROption56-109A

fiduciary

call

is

a

portfolio

consisting

of:A

long

position

in

a

European

call

option

with

an

exercise

price

of

X

thatmaturities

in

T

years

on

a

stock.A

long

position

in

a

pure-discount

riskless

bond

that

pays

X

in

T

years.The

cost

a

fiduciary

call

is

the

cost

of

the

call

(C0)

plus

the

cost

of

the

bond(the

present

value

of

X).

The

payoff

to

a

fiduciary

call

will

be

X

if

the

call

isout-of-the-money

and

ST

if

the

call

is

in-the-money,

as

shown

in

thefollowing:ST

≤X(Call

isout-of

or

at-the-money)ST

>X(Call

is

in-the-money)Lon