衍生品DerivativesChapter.pptVIP

* SAIF Dr. Ming Guo Derivative Securities Overview and Preparation * The big picture of the course What this course is about: the concept, the use, the pricing of derivatives. Objective of the course: this course aims to provide you with a general introduction to the tools of modern financial engineering: the construction of a financial product from other products. * Topics covered in this course Chapter 1 Introduction to Derivatives. Part I: Insurance, hedging, and simple strategies. Chapter 2, 3 and 4 Part II: Forwards, futures, and swaps. Chapter 5, 7, and 8 Part III: Options. Chapter 9, 10, 11, 12, 13, and 14 Other Topics: Financial engineering and corporate applications (Chapter 15) Credit instruments (Section 26.4) * Technical Preparation Time value of money, future value, present value, APR, EAR Continuous compounding (Appendix B) No Arbitrage Principle Normal distribution and lognormality of asset prices * Time Value of Money Time value of money refers to a dollar today is different from a dollar in the future Time value of money is measured by the interest rate for the period concerned. Nominal rate, real rate, and inflation rate. To compare money flows, we must convert them to the same time point. * Future Value and Present Value where FV = future value PV = present value r = the quoted annual interest rate m = the number of times interest is compounded per year n = the number of compounding periods to maturity * APR and EAR APR: annual percentage rate EAR: effective annual rate Compounding Frequency EAR (% p.a.) Annually 10.0000 Quarterly 10.3813 Monthly 10.4713 Weekly 10.5065 Daily 10.5156 Continuously 10.5171 APR = 10% * Continuously Compounding If r is quoted annual percentage rate and the interest is compounded continuously, $100 investment will result in $100enr after n years Consider a stock paying continuous dividend with ann