HullRMFI3rdEdCh07risk management and financial institutions PPT教学教案.pptVIP

* * * How Traders Manage Their Risks Chapter 7 Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * A Trader’s Gold Portfolio. How Should Risks Be Hedged? (Table 7.1, page 138) Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * Position Value ($) Spot Gold 180,000 Forward Contracts – 60,000 Futures Contracts 2,000 Swaps 80,000 Options –110,000 Exotics 25,000 Total 117,000 Delta Delta of a portfolio is the partial derivative of a portfolio with respect to the price of the underlying asset (gold in this case) Suppose that a $0.1 increase in the price of gold leads to the gold portfolio decreasing in value by $100 The delta of the portfolio is ?1000 The portfolio could be hedged against short-term changes in the price of gold by buying 1000 ounces of gold. This is known as making the portfolio delta neutral Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * Linear vs Nonlinear Products When the price of a product is linearly dependent on the price of an underlying asset a ``hedge and forget’’ strategy can be used Non-linear products require the hedge to be rebalanced to preserve delta neutrality Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * Example of Hedging a Nonlinear Product (page 140) A bank has sold for $300,000 a European call option on 100,000 shares of a nondividend paying stock S0 = 49, K = 50, r = 5%, s = 20%, T = 20 weeks, m = 13% The Black-Scholes-Merton value of the option is $240,000 How does the bank hedge its risk to lock in a $60,000 profit? Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * Table 7.2: Option closes in the money Risk Management and Financial Institutions, 3e, Chapter 7, Copyright ? John C. Hull 2012 * Week Stock Price Delta Shares Purchased 0 49.00 0.522