derivatives加拿大著名咨询公司在建设银行的讲座5.ppt

Derivatives Derivatives Lecture #5 Derivatives Definition: A derivative security is a security whose market value is determined by the value of another, underlying security Functions hedging speculation Risks inability to understand inability to form a perfect hedge cost Derivative Instruments Markets Traded or listed markets OTC Hedging Instruments Insurance Instruments Hedging Instruments Forward contracts A contract agreed upon to today to deliver a specified good at a specified price at a specified future date Futures contracts A standardized, exchange-traded forward contract Forward Rate Agreements Take a view as to future interest rates Swaps An exchange of interest and/or currency flows Insurance Contracts Option Contracts The right, but not the obligation, to either buy (call option) or sell (put option) something at a specified price for a specified period of time. Floors, caps and collars Methods of changing the interest rate risk of a floating rate debt obligation Swaptions An option to enter into a swap at a specified future date Forward Contracts Forward Contracts Forward Markets  Interest Rates The most liquid forward market is the “when-issued” Treasury Bill market. Dealers and investors buy and sell the as-yet-unissued Treasury Bill for delivery immediately after they are issued at auction. The activity in the “when-issued” market is a good indicator of where the market believes rates are headed Hedging Interest Rates with Forward Contracts Suppose you are holding $1,000,000 in six year, 8% coupon Eurobonds currently trading at par. You believe that interest rates will soon rise by 2%. How do you hedge the portfolio? Step #1: Calculate the bond’s duration Duration = 4.99271 Step #2: Predict capital loss ?P = (-D)(P)(?R/1+R) = -$92,457 Step #3: Adjust for convexity (or calculate actual price at new market interest rate of 10%) Price = $912,894.79 Actual loss thus equal to $1,000,000 - 912,894.79 = $87,105.21 Hedging Interest Rate