FRM一级-金融市场与产品（阅读版）

FinancialandProductsFRMFRMPartⅠSession1Session2AnalysisSession3Session4••RatesyDerivatives••••DerivativesForward•••ManagementBondMarketMarketRate234.Compounding.SpotRateandForwardRate.MarketRateCommonMarketyRatesTheratesaninvestorearnsonyandybonds.yrisk-freethatconsideredhighlyadevelopedcountrydefaultondebtissuedowncurrency。LIBORLIBORcompiledestimatedcostshighlyratedbanks.SOFRplansbeginphasingoutLiborandabasedactualtransactions。U.S.basedSecuredOvernightFinancingRate(SOFR)MarketRateCommonMarketRepoRatesInaagreement,thebetweenpriceandtherepurchasedprice(tomorroworlater)calledthereporate.Risk-Freerisk-freeatwhichpricedovernightusingovernight.yratenotadopted,artificially,mainlyduethefollowingtworeasons:doesnotcapitalforypositions.Insomecountries(suchasygetpreferentialtaxtreatment.CompoundingFrequenciesSupposeaccounttheaddedeachyearandthenthatmoneyalsoearnsinterest.AssumingRCtherateinterestcontinuouscompounding.Rmtherateinterestdiscretecompoundingperannum)Tthenumberyears.mTRmmRT=PV1+=PVeCm1Tm2TmT1m12m2RPV1+m=PVeRTCPV1+=PV1+mRateandForwardRateSpotAt-periodspotorzerorate,theearnedwhenreceivedatjustonefuturetime.DeterminingZeroRateswithBootstrapMethodWorkingforwardthematurity.othercouponscanbebyinterpolationtheratesthathavealreadybeendetermined.Example:theandyears2.0%,2.3%,the2yeara2bonda$100andamarketwhich(semi-annual)attherateperyearcanbecalculatedasfollows:1111+R/24+++=98.821+0.02/21+0.023/221+0.025/23RateandForwardRateForwardratesInterestratescorrespondingafutureperiodimpliedbythespotcurve.T1T−T)T21+R11+F=1+R221RT−RT2211RT×eFT2−T1=e2T2→F=e112−T1aaTyears.Whenacouponbond.atadiscount.Ifthecouponrategoesthegoesup.thecouponatsomeparticularexactlyequalthewhichcalledtherate.RateandForwardRateSpotForward98765432.00%.00%.00%.00%.00%.00%.00%.00%MaturityForwardSpot01.51.521.00%0.00%2.5123320.94%2F121.37%21+1+=1+F1=1.79%TheoriestheStructureInterestRatesExpectationsTheoryExpectationstheorythatratewherethemarketexpectinginterestratesbethefuture.Iftheexpectsrise,thebeupward-sloping,thatis,long-maturitybeinghighershort-maturityinterestrates.Ifmarketexpectsinterestdecline,structurebedownward-sloping,thatis,long-maturitybeingshort-maturityrates.Intheexpectationstheorycurveusuallyupwardsloping.TheoriestheStructureInterestRatesMarketSegmentationTheory;supplyanddemanddeterminethebondpricesorinterestrates.LiquidityPreferenceTheorypreferencetheorythatmostentitieslongandlendshort.Thistheoryconsistenttheempiricalthatyieldcurvesupwardsloping.1Ausesacontinuously-compoundedoneriskmodels.Whatinterestshoulduseconvertssemi-annualcompoundingthemodel?A.C.D.CorrectAnswer:C2Assumethatcompounded10-yearspotand9-yearspot4.9%.Whichfollowingclosest-yearforwardratenineyearsnow?1A.4.1%.5.1%.C.5.9%.D.6.0%.CorrectAnswer:CBondMarkety12.IntroductionBondMarkets.yInstrumentsIntroductionBondMarketsWhatabond?BondsBondsCouponRateMaturityYieldMaturity(YTM)AnnuityandPerpetualBondIntroductionBondMarketsHowtodeterminetheabond?T1C2CT(1+y)TCt(1+y)tP=++⋯+=�1+y(1+y)2t=1WhereCt=thecashflow(couponorprincipal)periodtt=numberperiodseachpayment(e.g.,halfyears;aquarteryears)T=thenumberperiodsmaturityy=thediscountingrateperperiodyInstrumentsyAshort-termdebtobligationamaturityoneyearorless.Interestrateexpressedonadiscountbasis.yNotesandyBondsBondaBondswhichtypicallyhavematuritiesbetweenyButsimple,coupon-bearingyinstrumentsasyBonds.Bothinterestpayments.Quoted：Dollarsandthirty-secondsadollarfaceySTRIPSandyInstrumentsCleanandDirtyyInstrumentsCleanpriceanotaccruedImmediatelyfollowingeachthecleanpriceequalthedirtyprice.DirtyAbondpricingpriceathatincludesflows,includingaccruingonthenextcouponpayment.dirtyprice=cleanprice+accruedinterestAccruedInterestandDayCountConventionsybonds:actual/actualCorporateandmunicipalbonds:Moneymarketinstrumentsyactual/360yInstrumentsExampleSupposeaUScorporatebondasemi-annualpercentonJanuary1thatAprilandComputethepricebondyield8percent.theflat(clean)pricetheabovebond.TimeMarAprMayJuneJulydirtypricecleanprice1Assumeabondafacethatasemi-annualcouponJanuaryand1st)acouponrate.settleson2014andmatures,thansixonJuly1st,thetradedyield(YTM)Whichthequotedclean)price?A.C.D.CorrectAnswer:BBondMarket12345.Bond.BondIndentures.ClassificationBonds.BondRisk.DebtRetirementBondCharacteristicBondsIssuedviaPlacementsHeldbytheoriginalpurchasersuntiloftennottraded.BondIssuedaPublicOfferingtradedtheover-the-countermarket.BondYieldearnedaassuminginterestprincipalaspromised.Composedarisk-freereturnandacreditspread.Partthemaybecompensationrisk.declines,investorsagreateryield.BondIndenturesBondIndentureContractcontainscorporatebondissuerpromisesandinvestors’rights.Madeoutcorporatetrustee,whorepresentsbondholders’interests.CorporateAfinancialaftertheandensuresthattheissuercompliestheindentures.Itsspecifiedthetheunderobligationexceedthoseduties.Forexample,sometimesthespecifiedthattheinformation,that,notconductinvestigations.ClassificationBondsInterestFixed-RateBondsFloating-RateBondsZero-CouponBondsInholderscoupon-bearingbondsclaimprincipaltheevent,holderscouponbondscanclaimthepurchasepriceplusaccruedinterest.MortgageBondsCollateralBondsEquipmentCertificatesDebentureBonds(includingSubordinatedDebentures)GuaranteedBondsClassificationBondsHigh-YieldBondHigh-yieldbondsratedgradebytheagencies,theseissuesalsoknownasjunkbonds.High-YieldBondIssuersOriginalIssuersAngelsRestructuringsandLeverageBuyoutsFeaturesDeferred-InterestBondsBondsPayment-in-Kind(PIK)BondsExtendableResetBondsBondRiskEventadverselyaffectbonds,suchasnaturaldisasters.riskcalledeventrisk.importanttypeeventrisktheriskaincreaseleverage.CreditCreditDefaultRisk:Riskabefinancialobligations.CreditSpreadRisk:Riskfinancialthelevelcreditspreads.MetricsIssuerDefaultvs.DefaultRecoveryExpectedReturn:Risk−FreeRate+CreditSpread−ExpectedLossRateDebtCorporateBondRetirementsbonds.severalmechanismsbywhichacorporationmaygoaboutretiringtheirdebt:CallprovisionSinking-fundprovisionsMaintenanceandreplacementfundsoffers1Aportfolioa10-yeargradecorporatebond.Whichtasksmusttypicallybeperformedbythecorporatetrusteelistedtheindenture?A.ActafiduciarycapacityforthebondEnsurethatreportedfinancialmeetrequirementstheindenture.C.ChangethethebondD.Monitorcovenantcompliance.CorrectAnswer:B2Whichtherisk,asotherbeingequal?A.Juniortranches.Equitytranches.C.ETCs.D.Debentures.CorrectAnswer:CMarketIntroductionDerivativesCategoriesandExchangeMarketCentralCounterpartyIntroductionDerivativesAnwhoseontheotherunderlyingassets.DerivativesForwardandFuturesAgreementbuy/sellassetatfutureforcertainprice.Forward:tradedtheover-the-countermarket.Futures:andtradesonanexchange.SwapAseriesforwardcontracts.Exchangecashflowsonperiodsettlementdates.OptionGivesholdertheright(butnotobligation)buy/sellatacertainprice.IntroductionLinearandNon-LinearDerivativesDerivativescanbedividedlinearandnonlinearcategories.underlyingassets.Forexample,forwardcontractslinearderivatives.Options,onthehand,,thatis,anon-linearbetweentheandthetheunderlyingasset.IntroductionDerivativesSpeculatorsleveragetrading,whichmeanstradersvulnerablesignificantrisks.Andsuccessfulspeculationthattradersstartspeculating,startedhedgingorlookingforarbitrageopportunities.Ifnotplace,tradersstartspeculatingwithouttheknowledgeothersorganization.Inaddition,traders,mayseektheirbyandriskypositions.domaterialize,tradersmayrisklossescatastrophiclevels.CategoriesHedgersUseriskpricesmovingunfavorablyfortheirongoingbusinessactivities.SpeculatorsUseseekbybettingonthedirectionmarketpricestheunderlyingasset.ArbitrageursUsepositionstwoorlocka.MarketMakerAatheaparticularfinancialsellsimultaneously.andExchangeMarketOver-the-CounterandExchangeOver-the-CounterCustomizedwithcounterparty(DefaultRisk)BackedbyaclearinghouseNottradeacentrallocationUnregulatedaphysicalexchangeRegulatedvolume:volume:smallandExchangeMarketExchangeMarketAnexchangeacontractsmadebyexchanges.exchangesclearmembersso-calledcentralcounterpartiesExchanges(throughtheirCCPS)actascounterpartiesmembers.Anotherathatexchangememberscloseoutpositions.Anothermembersnetting.anoperationwhichshortpositionsaparticularcontractcanoffseteachotheandExchangeMarketExchangeMarketmembersthemselvesbymargin.Margintransferredtraderanotherforprotectionagainstcounterpartydefault.MarginMarginInaddition,memberssubmitafundasaprotection.Ifmarginsufficientaduringadefault,fundcontributionsbeusedcoverthedifference.Iftheseinsufficient,bythedefaultfundsothermembers.andExchangeMarketMarginonanexchangenotsettledatInstead,marketdaybyEachtheanequaltheloss,whileamountequalgainthemarginandusuallyoccur.MarkinghasimportantclosingcontractsandExchangeMarketExampleConsiderXcontracts(contractsbushelscornSupposethepricecentsbushelattheclose1andcentsatthecloseDayXhaslost15,000×orThisbecausenowworthbushelworthatcloseontraderrequiredcorncentsbushelatthecloseDayXhasgained15,000×5orUSDIncase,theexchangethetraderUSDandExchangeMarketMarginmarginsetbytheandonpriceBecausecontractsbydointereston.interestmarginbelongsIfthebynotsatisfactory,memberscashdepositssecuritiesasybills.thatcase,thesecuritiesacertaintheircashmarginequivalents.Thisreductioncalledahaircut.andExchangeMarketMaintenanceMarginSoabouttheirmembers.atraderatrade,thattraderberequiredmargintheMarginbetweentradersanddifferthosebetweentheirmembers.Itcontainsmargin.generalrulesmargin,accountmustadditionalmarginaccountthemarginIfaonbehalfthetradercloseouttheposition.andExchangeMarketExampleContractSpecificationsContractSize(ounces)NumberContractsInitialFutures2MarginInitialMaintenancemarginandExchangeMarketandExchangeMarketMarketAnmarketawhichparticipantsdirectlycontacteachother(orpossiblybyusingaasanintermediary)trade.participantsbedividedendusersanddealers.End-usersfundmanagersotherfinancialthatriskorgainspecificexposures.Dealersfinancialthatandcommontrades.mostpopularmarket.Mostinterestrateinterestrateswaps.andExchangeMarketMarketattractionthatdonotneedbestandardized,betheendonethemaindisadvantagesthecounterpartyrisk.Inbilateralclearing,riskmanagementcanbecarriedoutbycallingfor.supportannexthemasteragreementspecifieshowcalculatethecollateralrequiredandwhatsecuritiescanbepostedascollateral.cleared.thepartiesarrangementsbeusedandcollateral,bebeenandbeenusedthethefinancialcrisis.andExchangeMarketMarketBeforecreditcrisis,Severalruleshavebeenthefinancialcrisis.someimportantrules:InUS,betweendealersmusttradedswapexecutionfacilities.participantswhopublishandaskprices.Centralcounterpartiesmustforstandardizedbetweendealers.Alltransactionsmustbereportedacentralregistry.andExchangeMarketMarketAPurpose(SPV),aSpecialPurposeEntity(SPE),acompanyestablishedanotherthecreditriskthetwocompanieslegallyseparate.SPEsusedconstructportfoliosassets,suchasmortgagesorothertypesloans.Forexample,supposeXSPV/SPEcompanyXtransfersYandnothem.IfXgoesYcancontinuemeetobligations(andviceversa).1Whichfollowingstatementsincorrectmarginingexchange-tradedfuturescontracts?A.Daytradesandspreadtransactionslowermarginlevels.IfandepositatimelythepositionsmaybeliquidatedbythecarryingC.Initialmarginmoneythatmustdepositedafuturescontractopened.D.Amargincallbeissuedtheaccountbalancebecomesnegative.CorrectAnswer:D2Atraderbuyscontract(underlying=bushels)atapriceperbushel.marginonthecontractandmarginwhatpricethereceiveamaintenancemargincall?A.C.D.CorrectAnswer:B3utilizecashpositionassetsaportfolioentersintoalongfuturespositionS&P500indexwithamultiplierpositionis$15millionwhich1,000,long60Ifinitialis$12,500andis$10,000whatportfoliohaveiffuturescontractfalls995firstpositionbeingA.$30,000B.$0C.$300,000D.$75,000CorrectAnswer:B4SeptemberatraderopensaDecemberS&Pfuturescontracts.USD2million,andCMEaUSDmillion.AssumepositionopenSeptembernowithdrawalsplace.summarizeschangethepositionforthatperiod:DateDecemberS&PFuturesGain/Loss(USD)-4whatdatesadditionalmarginberequired?A.SeptemberbutnotSeptemberSeptemberbutnotSeptemberC.SeptemberandSeptemberD.NeitherSeptembernorSeptemberCorrectAnswer:ACentralCounterpartyIntroductionThis.Thesesimilarthoseusedbyexchanges.membersmustmarginandcontributionsthedefaultfund.beingclearedbeingclearedbyexchanges.thatcontractsexchange-tradedcontracts.affectcalculationmargin.Whendeterminingmarginrequirementsformarkets,amodelusuallyused.CentralCounterpartyCentralCounterpartyOperationpaymentsreflecttheeachmember'sportfolio.marginbebyeachcalculatedusinghistoricaldata.defaultinsufficientcovertheloss,defaultneedsusedIfnotenough,contributionsothermembersused.Whenamemberexchangeholdsauction,othermembersforthetransaction.maychooseupdeals.closetransactionsbetweenaanddefaultingpartyatapricethatcausessomelossthenon-defaultingCentralCounterpartyCentralCounterpartyDerivativesMarketintroducedfinancialcrisishaveledanincreaserulesbeliefthatcomplexparticularlyderivedsubprimemortgageportfolios,playedatriggeringthecrisis.WhenleadersmetPittsburghtheyparticularlyconcernedaboutsystemicrisk.TheirstatementafterPittsburghsummitincludedthefollowingparagraphs:Allstandardizedcontractsshouldtradedontheorelectronictradingplatformclearedthecounterpartybyendatthecontractsshouldreportedtherepositories.clearedcontractsshouldmeethighercapitalrequirements.CentralCounterpartyDerivativesMarketmeetingthreemajoraffectingderivatives.standardizedbeCCPs.swapsdefaultindices.anwhichtraderseachreducinginterconnectednessandsystemicrisk.standardizedbetradedelectronicpricetransparenctransactionsbereportedcentraltrade.regulatorsimportantinformationabouttherisksbymarket.CentralCounterpartyContrast:MarginRequirementsBilateralMarketsrules,whichbetweenandbetradedtwoinstitutions,orbetweenafinancialandasystemicallyimportantnon-financialnewmarginandmarginmustbesubmitted.tradespassedcounterpartythatmarginapartybeheldtrust.CentralCounterpartyAdvantagesandDisadvantagesAdvantagesCentralClearingEasyexitLossmutualizationmanagementmechanism(margin,resolution)IncreasedFormulationstandarddocumentsfortransactions.DisadvantagesCentralClearingMoralhazardAdverseselectionProcyclicalityCreditriskfacedbymembersbasedondefaultfundscontributionCentralCounterpartyDefaultDefaultathepossibleassociatedorknock-oneffectsthatcouldcause.Aftermathadefaulteventfurtherorotherclearingmembers;auctions;Resignations;Reputational.LiquidityAriskduequantitiescashthatflowthroughthemduemarginpaymentsandothercashflows.Ineventadefault,themustfulfilobligationssurvivingmembersatimelymanneCentralCounterpartyModelmark-to-marketmarginpurposes.marking-to-marketmuststandardandrobustacrosspossiblemarketscenarios.MostexposedmodeltheirmarginParticularcouldmisspecificationrespectrisk,complexdependenciesandwrong-wayrisk.Anotherimportantmodelsthatimpose.example,model-basedproportionaposition.Itimportantsituationadditionalcomponentssuchasmarginmultipliers.CentralCounterpartyOperationalCCPsexposedoperationalrisks,suchassystemsfailuresandfraud.LegalAspectssuchasmovementmarginandpositionscanbesubjectlegalrisklawsdifferentjurisdictions.InvestmentLossesinvestmentscashandsecuritiesheldasmargin.OtherSettlementrisk,risk,risk,concentrationrisk,sovereignrisk,andwrong-wayrisk.MarketForward1234567..Forward..Forward...Forwardvs.FuturesContractslongposition,shortposition.Deliveryprice=KPriceassetatcontractmaturity=ST00KSTSTK=ST–K=K–STUnderlyingAssetsAssetUnderlyingassetfinancialasset.Forexample,stocksandbonds.CommodityAssetUnderlyingcommoditiesinclude:metalsaluminum,lead);(gold,energyBrentcrudeandsoon.ImportantDifferencesbetweenCommoditiesandAssetsassetsnegligible.thecoststoringcommoditiescanbeconsiderable.Commoditiescanbeexpensivetransport,sopriceonlocation.contrast,transportedatvirtuallynocost.UnderlyingAssetsImportantDifferencesbetweenCommoditiesandAssetsCommoditiesheldpurposes,suchgoldsilveborrowedshorting.mustcalledarate.leasecouldexceedthecostfinancialassetsshortthem.Financialexpectedfinancialthatreflectrisk.MostcommoditieshaveIndeed,themostcommoditiesmean.ThisthatwhilecommoditypricestheytowardsacentralUnderlyingAssetsCommodityConceptsLeaseRatesratechargedborrowtheunderlyingasset.ConvenienceYieldsconvenienceyieldassetholderhavingtheirinventoryasaprotectionagainstfutureshortages.Assumethatsufficientsupplyassetsduringthecontract.Thismeanscanatanyandalmostconvenienceyieldcouldbeclosezero.shortages,thentheconvenienceyieldcanbequitehigh.UnderlyingAssetsCommoditiesAgriculturalCommoditiesAgriculturalcontracts(suchsoybeans,sugar)and(suchascattleandhogs).agriculturalproductsexpensive.anamongagriculturalcommodities.Pricesforagriculturalcanseasonal.Thisseasonalitysometimesprices,whichpresentaandinvertedpricingpatterns.UnderlyingAssetsCommoditiesMetalsCommodityplatinum,lead,zinc,nickelandaluminum.Metalpricesnotsubjectweatherandnotseasonal.Theyusuallycheaperstorethanthoseagriculturalproducts.Somepurelypurposes.thattheirpricesobtainedobservablevariables.Astheagriculturalproducts,inventoryimportantdeterminingprices.Mostmetalscountryconsumedexchangeratescanaffectprices.UnderlyingAssetsCommoditiesEnergycrudemarketthecommodityimportantbenchmarksoilwest(WTI)crudegasusedforheatingItbutthecosthigh.Italsotransport,pricescanvarybynaturalhighwinterheating)lowproducingelectricityconditioning).Thiscreatesseasonalitythefuturesprices.Electricityancommodityalmostimpossible.electricitycanleadpricefluctuations.UnderlyingAssetsCommoditiesWeathercontractsbothexchange-tradedandover-the-countermostpopularcontractsbased(whichimportantheating(HDDs)andcooling(CDDs).CDDa(respectively)definedas:HDD=max0,65−ACDD=max(0,A−65)AthehighestandagivenataspecifiedstationasmeasuredForwardRateAgreementForwardRateAgreementAforwardagreement(FRA)anagreementthatacertainapplyacertainprincipalduringacertainfutureperiod.Thebuyerlocksaborrowingrate,andthesellerlocksalendingrate.Settlement:paymentnormallyattheperiod.settledatthebeginningperiodbybyconvention.partyfixedandreceivesortheothersidethetransactionis:R−RK+RτRK−R1+Rτor1WhereRtherate,RKthefixedLprincipalandτthelengththehorizon.ForwardRateAgreementforthepartyandortheothersidethetransactionis:R−RFKPVPV1+RFτR−RKF1+RFτWhereRFtheforwardbeginningtheperiod1Assumeone-yearcompounding.Whattheaforwardrateagreementholderearnexpressedquarterlya3-monthstartingyearonanotionalA.C.D.CorrectAnswer:BFuturesMarketOperationExchangescontractsdefinedbyexchanges.counterpartymemberstheexchangewhentheytrade.MemberspostmarginandcontributeadefaultprotecttheCCPandmembersagainstlosses.settledbymarginsidethecanbeclosedoutbyenteringanoffsetposition.FuturesMarketOperationExchangescontractsthatexistatanycalledopeninterest.Thiscontractsheldbymembers,whichequalthenumbernetshortcontractsheldbymembers.contractstradedacalledvolume.IfmanytradersclosethedaymaybethanopenItcanalsohappenthereaamountintradaytrading.FuturesMarketSpecificationContractsUnderlyingAssetAsconcerned,underlyingassetssimple.example,underlyingacontracttradedbyCMEtimesthetheasseta(e.g.,cotton,orangetheexchangespecifiesagrade(quality).ContractybondFutureshasafaceS&PFuturescontractindex(multiplierEurodollarfuturescontracthasafacemillion.FuturesMarketSpecificationContractsDeliveryChooseWheneverachoiceaboutandwhentheshortpartyalmostalwaysrightchoose.Settlementsettlementpricepriceatthecloseanduseddeterminethesettlement.Quotesspecifiesminimumpricechangeforeachcontract.FuturesMarketSpecificationContractsFormostcontracts,exchangessetonapricemovea.Ifapricerisesorprice,tradingusuallystopsforthepricepricecausedbyspeculation.pricemayhamperdeterminationmovesinformationreachingthemarket.Limitsthatspeculatorshold.speculatorsexertingthemarket.FuturesMarketFuturesMarketConvergenceFuturesandSpotAsthedeliveryperiodpricethespotprice.pricehigherspotpricedeliveryperiod,anarbitrage,whichcanberealizedby:Shortingfutures,Buyingtheasset,andMakingthedelivery.Sucharbitrageopportunitiesdonotlastbecauseadvantagethem.Inaddition,pricespotpricethosewantaccesstheunderlyingfindlongpositionswaitforWhentheydoso,futurespricesrisetowardspotprices.FuturesMarketNormalandInvertedFuturesMarketFuturesSpotSpotTimeFuturesTimeIfprice,curvesaidbenormal,orContango.Ifthepriceincreases,curvebeinverted,orBackwardation.Someassetshavepatternsthatpartlynormalandpartlyinverted.FuturesMarketDeliveryMechanicsdeliverybeginswhenaashortaexchangenoticeindicatesmanycontractsbedelivered.deliverynoticesthememberthelongestnetlongposition.Incontractscouldbebesettledcash.CMES&Pindexcontractssettledcash.CMEpopularEurodollarfuturescontractalsosettledcash.FuturesMarketOrderMarketOrderAacarriedoutatthebestpricethemarket.OrderThisspecifiesaparticularprice,thebeexecutedatpriceoratonemorefavorabletheOrder/Stop-LossOrderAlsospecifiesaparticularprice.executedatthebestpriceaoratthatparticularpricealess-favorableprice.FuturesMarketOrderStop-LimitOrderCombination&orderassoonabid/offermadeatapriceequalto/lessfavorablethanthestopprice.Order/BoardOrderExecutedatbestpriceafteratradeoccursataspecifiedprice/atapricefavorablespecifiedprice.ItdesignedensuresufficientlyfavorablepricemovementsoccuDiscretionaryOrder/Market-not-HeldOrderIstradedasathatmayatdiscretionanattemptgetabetterprice.Fill-or-KillOrderMustbeexecutedimmediatelyonreceiptornotatFuturesMarketAccountingNormalaccountingrulestransactionsbeaccountedforastheyoccuexample,agoldminingfiscalyearendssellstwo-yearcontractsJune,whenpriceUSDperforeachcontractounces.Supposefurtherthefollowingscenarios:InDecemberfirstcalendarpriceperounce.InDecemberthesecondcalendarpriceUSDperounce.contractclosedoutatUSDpercalendarFuturesMarketAccountingTheUSDthenreportedasfollows:Firstfiscalyear:1,400−××=300,000Secondfiscalyear:1,340−××=400,000Thirdfiscalyear:−××=−150,000Ifhedgesthegoldexpectstwoyears'time,contractmayhedgingaccountingrules.providesanexceptionthegeneraljustmentioned,andallowsthe(orloss)thehedgingtransactionbeatthesameastheloss(orgain)thehedgeditems.FuturesMarketAccountingFinancialhasandASCexplainwhenhedgingcanandcannotusedbyAmericanAccounting(IASB)alsopublishesIAS39andIFRSIftheproducerunderforaccounting,thegain(=(1,400-1,290)×100×50)berealizedyearThatcouldappealwhichreduceearningsFuturesMarketFuturesvs.ForwardForwardFuturesover-the-counterNotstandardizedonanexchangecontractsRangedeliverydatesSettledOnespecifieddeliverydateSettledatendDeliveryorfinalcashsettlementusuallyoccursContractusuallyclosedoutpriormaturityReducesriskduespecificationsbutlessduestandardizedspecificationsbutmoreriskDefaultriskpresentGuaranteedbyclearinghouseMarginrequiredandadjustedNomargindepositrequired1Anaacontractissueinstructionscloseoutposition.Abeusedtheinvestorwantsto:A.atthebestpriceonceatradeoccursatspecifiedorbetterprice.atbestpriceaoccursatspecifiedorworseprice.C.Allowadelayexecutiontheordergetabetterprice.D.ExecutetheorderimmediatelyornotatCorrectAnswer:A2Anaturalhedgeriskadeclinepricenaturalnextmonths.producerashortposition3-monthnaturalgascontractandshortthecontractatapriceUSD5orWhichdescribestypeorder?A.Market-not-heldorderorderC.DiscretionaryorderD.LimitorderCorrectAnswer:D3pricebetweencashandS&Pindex,basedfollowinginformation.FuturesExpiryFuturesHowwouldyoudescribethestructureA.ThemarketnormalThemarketshowsbackwardationC.ThemarketmixedD.Themarketi