衍生品市场基础09章.pptVIP

Ch8 Chapter 8 Chapter 8 Swaps Introduction to Swaps A swap is a contract calling for an exchange of payments, on one or more dates, determined by the difference in two prices A swap provides a means to hedge a stream of risky payments A single-payment swap is the same thing as a cash-settled forward contract An Example of a Commodity Swap An industrial producer, IP Inc., needs to buy 100,000 barrels of oil 1 year from today and 2 years from today The forward prices for deliver in 1 year and 2 years are $20 and $21/barrel The 1- and 2-year zero-coupon bond yields are 6% and 6.5% An Example of a Commodity Swap (cont’d) IP can guarantee the cost of buying oil for the next 2 years by entering into long forward contracts for 100,000 barrels in each of the next 2 years. The PV of this cost per barrel is Thus, IP could pay an oil supplier $37.383, and the supplier would commit to delivering one barrel in each of the next two years A prepaid swap is a single payment today for multiple deliveries of oil in the future An Example of a Commodity Swap (cont’d) With a prepaid swap, the buyer might worry about the resulting credit risk. Therefore, a better solution is to defer payments until the oil is delivered, while still fixing the total price Any payment stream with a PV of $37.383 is acceptable. Typically, a swap will call for equal payments in each year For example, the payment per year per barrel, x, will have to be $20.483 to satisfy the following equation We then say that the 2-year swap price is $20.483 Physical Versus Financial Settlement Physical settlement of the swap Physical Versus Financial Settlement (cont’d) Financial settlement of the swap The oil buyer, IP, pays the swap counterparty the difference between $20.483 and the spot price, and the oil buyer then buys oil at the spot price If the difference between $20.483 and the spot price is negative, then the swap counterparty pays the buyer Physical Versus Financial Settlement (cont’d) Whatever the market