投资公司英文提案CHT27.pptVIP

Chapter 27 Risk Managementand Hedging Hedging Foreign Exchange Risk US firm wants to protect against a decline in profit that would result from a decline in the pound Estimated profit loss of $200,000 if the pound declines by $.10 Short or sell pounds for future delivery to avoid the exposure Hedge Ratio for Foreign Exchange Example Hedging Systematic Risk To protect against a decline in level stock prices, short the appropriate number of futures index contracts Less costly and quicker to use the index contracts Use the beta for the portfolio to determine the hedge ratio Hedging Systematic Risk: Text Example Hedge Ratio: Text Example Uses of Interest Rate Hedges Owners of fixed-income portfolios protecting against a rise in rates Corporations planning to issue debt securities protecting against a rise in rates Investor hedging against a decline in rates for a planned future investment Exposure for a fixed-income portfolio is proportional to modified duration Hedging Interest Rate Risk: Text Example Hedge Ratio: Text Example Hedging On Mispriced Options Option value is positively related to volatility If an investor believes that the implied volatility that is implied in an option’s price is too low, a profitable trade is possible Profit must be hedged against a decline in the value of the stock Performance depends on option price relative to the implied volatility Hedging and Delta The appropriate hedge will depend on the delta Recall from Chapter 21 the delta is the change in the value of the option relative to the change in the value of the stock Mispriced Option: Text Example Hedged Put Portfolio Profit Position on Hedged Put Portfolio Hedging Demands on Capital Market Equilibrium CAPM assume that investors face only risk about the uncertain value of securities Many additional elements of risk are present Uncertain prices on consumption, energy or housing Uncertain future interest rates Hedging activity associated with these elements of risk are consistent