Lecture Arbitrage and forward contracts培训讲义.pptVIP

Financial Mathematics 李社环 上海财经大学金融学院保险系 （E-mail: lshhuan@163.com ） 2009年12月 Lecture 12  Arbitrage and forward contracts An introduction to derivatives Calculate the delivery price Calculate the price of a forward contract Define “arbitrage” An introduction to derivatives Forward Definition: A Forward Contract is an agreement made at some time t = 0, say, between two parties under which one agrees to buy from the other a specified amount of an asset (denoted S) at a specified price on a specified future date. The buyer of the asset holds a long position The seller of the asset holds a short position Long or short position The investor agreeing to sell the asset is said to hold a short forward position in the asset, and the buyer is said to hold a long forward position. Factors Striking price, or forward price K; Maturity time T; Effective date 0; Underlying asset S Commodities: wheat, coffee Securities: bond, stock Price of asset S at T: ST Some rules Initial price of forward contracts is set to zero. At the maturity Long position is worth ST -K Short position is worth K –ST An example A producer of wheat made, at January 15, 2000, with a buyer, a wheat forward contract which prescribed that the producer would sell 10 tons to the buyer at the price of $1050 per ton half years later, i.e. on July 15, 2000. Future Contracts Definition: A Future Contract is a standard, exchange tradable contract between two parties to trade a specified asset on a set in the future at a specified price. A future is a special Forward Contract. Comparison of forwards and futures Types of futures Commodity Future Financial Future Currency future Stock future Bond future Stock index future Interest rate future Related concepts Long position Short position Margin Initial Margin Variation Margin Clearing house Options Definition: An option gives an investor the right but not the obligation to buy or sell a specified asset on a specified futur