Chapter 2 Financial Markets 风险管理与金融机构PPT（英文）.pptVIP

Financial Products and How They Are Used for Hedging Chapter 2 Financial Markets Exchange traded Traditionally exchanges have used the open-outcry system, but increasingly they are switching to electronic trading Contracts are standard; there is virtually no credit risk Over-the-counter (OTC) A computer- and telephone-linked network of dealers at financial institutions, corporations, and fund managers Contracts can be non-standard; there is some small amount of credit risk Arguments in Favor of Hedging Companies should focus on the main business they are in and take steps to minimize risks arising from interest rates, exchange rates, and other market variables Example of Importance of Looking at the Big Picture When Hedging In some industries fluctuations in raw material costs are passed on to the purchasers of the end product In this case ``hedging?raw material costs actually increases risks! (See gold jewelry producer example on pages 29 and 30) Financial Products Long/short positions Forwards Futures Swaps Options Exotics Short Selling (32) Short selling involves selling securities you do not own Your broker borrows the securities from another client and sells them in the market in the usual way Short Selling(continued) At some stage you must buy the securities back so they can be replaced in the account of the client You must pay dividends and other benefits the owner of the securities receives Forward Contracts A forward contract is an agreement to buy or sell an asset at a certain price at a certain future time Forward contracts trade in the over-the-counter market They are particularly popular on currencies and interest rates Foreign Exchange Quotes for GBP August 5, 2005 (See page 32) 1.7755 1.7749 6-month forward 1.7766 1.7761 3-month forward 1.7785 1.7780 1-month forward 1.7798 1.7794 Spot Offer Bid 14 Profit from aLong Forward Position Profit Price of Underlying at Maturity, ST K 15 Profit from a