ch12DERIVATIVES ANALYSIS AND VALUATION(投资学,赖利)概要1.pptVIP

Chapter 12 DERIVATIVES: ANALYSIS AND VALUATION Chapter 12 Questions How are spot and futures prices related? What is basis risk? What is program trading and stock index arbitrage? How can futures be used to hedge or speculate on changes in yield curve spreads and credit quality spreads? Why would investors want to invest in an option on a futures contract? Chapter 12 Questions What factors influence the price of an option? How does one use the Black-Scholes option-pricing model? Why are the terms delta,theta, vega, rho, and gamma important to option investors? How do option-like features affect the price of bonds? Futures Valuation Issues Cost of Carry Model Suppose that you needed some commodity in three months. You have at least the following two options: Purchase the commodity now at the current spot market price (S0) and “carry” the commodity for 3 months Buy a futures contract for delivery of the commodity in 3 months for the current futures price (F0,3) Futures Valuation Issues Cost of Carry Model The futures prices and spot prices must be related to one another in order for there to be no arbitrage opportunities for investors. If the carrying cost only amounts to forgone interest at a risk-free rate (rf) for T time periods, then the following relationship must hold: F0,T = S0 (1+rf)T Futures Valuation Issues Cost of Carry Model Example: Suppose that you can buy gold in the spot market for $300. The monthly risk-free is .25%. You need the gold in three months. What should be the current futures price? F0,T = 300 (1+.0025)3 = 302.26 What if the futures price is $305? You have a risk-less profit opportunity. Buy gold at $300, sell futures at $305. In three months, delivery the gold, pay the known interest, pocket the difference. Futures Valuations Issues Similar futures-spot price relationships can be derived when there are “market imperfections” involved with carrying the commodity or financial asset Incorporating storage and insurance costs as a percenta