Chapter1 Introduction TheNatureofDerivatives Aderivativeisaninstrumentwhosevaluedependsonthevaluesofothermorebasicunderlyingvariables ExamplesofDerivatives SwapsOptionsForwardContractsFuturesContracts DerivativesMarkets ExchangeTradedstandardproductstradingfloororcomputertradingvirtuallynocreditriskOver the Counternon standardproductstelephonemarketsomecreditrisk WaysDerivativesareUsed TohedgerisksToreflectaviewonthefuturedirectionofthemarketTolockinanarbitrageprofitTochangethenatureofaliabilityTochangethenatureofaninvestmentwithoutincurringthecostsofsellingoneportfolioandbuyinganother ForwardContracts Aforwardcontractisanagreementtobuyorsellanassetatacertaintimeinthefutureforacertainprice thedeliveryprice Itcanbecontrastedwithaspotcontractwhichisanagreementtobuyorsellimmediately HowaForwardContractWorks Thecontractisanover the counter OTC agreementbetween2companiesThedeliverypriceisusuallychosensothattheinitialvalueofthecontractiszeroNomoneychangeshandswhencontractisfirstnegotiatedanditissettledatmaturity TheForwardPrice Theforwardpriceforacontractisthedeliverypricethatwouldbeapplicabletothecontractifwerenegotiatedtoday i e itisthedeliverypricethatwouldmakethecontractworthexactlyzero Theforwardpricemaybedifferentforcontractsofdifferentmaturities 远期价格 我们把使得远期合约价值为零的交割价格称为远期价格 ForwardPrice 这个远期价格显然是理论价格 它与远期合约在实际交易中形成的实际价格 即双方签约时所确定的交割价格 并一定相等 一旦理论价格与实际价格不相等 就会出现套利 Arbitrage 机会 远期价格与远期价值的区别 远期价格指的是远期合约中标的物的远期价格 它是跟标的物的现货价格紧密相联的 远期价值则是指远期合约本身的价值 它是由远期实际价格与远期理论价格的差距决定的 远期合约的由来和优缺点 远期合约是适应规避现货交易风险的需要而产生的 远期合约是非标准化合约 灵活性较大 缺点 效率较低 流动性较差 违约风险较高 Terminology ThepartythathasagreedtobuyhaswhatistermedalongpositionThepartythathasagreedtosellhaswhatistermedashortposition Example page3 OnJanuary20 1998atraderentersintoanagreementtobuy 1millioninthreemonthsatanexchangerateof1 6196Thisobligatesthetradertopay 1 619 600for 1milliononApril20 1998Whatarethepossibleoutcomes ProfitfromaLongForwardPosition profit K PriceofUnderlyingatMaturity ST ProfitfromaShortForwardPosition ST K FuturesContracts AgreementtobuyorsellanassetforacertainpriceatacertaintimeSimilartoforwardcontractWhereasaforwardcontractistradedOTCafuturescontractistradedonanexchange 1 Gold AnArbitrageOpportunity Supposethat ThespotpriceofgoldisUS 300The1 yearforwardpriceofgoldisUS 340The1 yearUS interestrateis5 perannumIsthereanarbitrageopportunity 2 Gold AnotherArbitrageOpportunity Supposethat ThespotpriceofgoldisUS 300The1 yearforwardpriceofgoldisUS 300The1 yearUS interestrateis5 perannumIsthereanarbitrageopportunity TheForwardPriceofGold IfthespotpriceofgoldisS theforwardpriceforacontractdeliverableinTyearsisF thenF S 1 r Twhereristhe1 year domesticcurrency risk freerateofinterest Inourexamples S 300 T 1 andr 0 05sothatF 300 1 0 05 315 1 Oil AnArbitrageOpportunity Supposethat ThespotpriceofoilisUS 19Thequoted1 yearfuturespriceofoilisUS 25The1 yearUS interestrateis5 perannumThestoragecostsofoilare2 perannumIsthereanarbitrageopportunity 2 Oil AnotherArbitrageOpportunity Supposethat ThespotpriceofoilisUS 19Thequoted1 yearfuturespriceofoilisUS 16The1 yearUS interestrateis5 perannumThestoragecostsofoilare2 perannumIsthereanarbitrageopportunity ExchangesTradingFutures ChicagoBoardofTradeChicagoMercantileExchangeBM F SaoPaulo Brazil LIFFE London TIFFE Tokyo andmanymore seelistatendofbook Options Acalloptionisanoptiontobuyacertainassetbyacertaindateforacertainprice thestrikeprice Aputisanoptiontosellacertainassetbyacertaindateforacertainprice thestrikeprice LongCallonIBM Figure1 2 Page5 ProfitfrombuyinganIBMEuropeancalloption optionprice 5 strikeprice 100 optionlife 2months ShortCallonIBM Figure1 4 page9 ProfitfromwritinganIBMEuropeancalloption optionprice 5 strikeprice 100 optionlife 2months LongPutonExxon Figure1 3 page6 ProfitfrombuyinganExxonEuropeanputoption optionprice 7 strikeprice 70 optionlife 3mths ShortPutonExxon Figure1 5 page7 ProfitfromwritinganExxonEuropeanputoption optionprice 7 strikeprice 70 optionlife 3mths PayoffsfromOptionsWhatistheOptionPositioninEachCase X Strikeprice ST Priceofassetatmaturity TypesofTraders HedgersSpeculatorsArbitrageursSomeofthelargetradinglossesinderivativesoccurredbecauseindividualswhohadamandatetohedgerisksswitchedtobeingspeculators HedgingExamples pages10 AUScompanywillpay 1millionforimportsfromBritainin3monthsanddecidestohedgeusingalongpositioninaforwardcontractAninvestorowns500IBMsharescurrentlyworth 102pershare Atwo monthputwithastrikepriceof 100costs 4 Theinvestordecidestohedgebybuying5contracts SpeculationExample Aninvestorwith 7 800toinvestfeelsthatExxon sstockpricewillincreaseoverthenext3months Thecurrentstockpriceis 78andthepriceofa3 monthcalloptionwithastrikeof80is 3Whatarethealternativestrategies ArbitrageExample page11 Astockpriceisquotedas 100inLondonand 172inNewYorkThecurrentexchangerateis1 7500Whatisthearbitrageopportunity ExchangesTradingOptions ChicagoBoardOptionsExchangeAmericanStockExchangePhiladelphiaStockExchangePacificStockExchangeEuropeanOptionsExchangeAustralianOptionsMarketandmanymore seelistatendofb