货币金融学7版本英文课程--13-大学课程2.pptVIP

Chapter 13 Financial Derivatives Hedging Hedge: engage in a financial transaction that reduces or eliminates risk Basic hedging principle: Hedging risk involves engaging in a financial transaction that offsets a long position by taking a short position, or offsets a short position by taking a additional long position Factors Affecting Premium 1. Higher strike price ? lower premium on call options and higher premium on put options Greater term to expiration ? higher premiums for both call and put options 3. Greater price volatility of underlying instrument ? higher premiums for both call and put options Financial Futures Markets Financial futures are classified as Interest-rate futures Stock index futures, and Currency futures In Canada, financial futures are traded in the Montreal Exchange (see Table 13-1) Interest-Rate Forward Markets Long position = agree to buy securities at future date Hedges by locking in future interest rate if funds coming in future Short position = agree to sell securities at future date Hedges by reducing price risk from change in interest rates if holding bonds Pros 1. Flexible (can be used to hedge completely the interest rate risk) Cons 1. Lack of liquidity: hard to find a counterparty to make a contract with 2. Subject to default risk: requires information to screen good from bad risk Widely Traded Interest-RateFutures Contracts Interest Rate Futures Markets Interest Rate Futures Contract 1. Specifies delivery of type of security at future date 2. Arbitrage ? at expiration date, price of contract = price of the underlying asset delivered 3. i ?, long contract has loss, short contract has profit 4. Hedging similar to forwards Micro vs. macro hedge Traded on Exchanges: Global competition Success of Futures Over Forwards 1. Futures more liquid: standardized, can be traded again, delivery of range of securities 2. Delivery of range of securities prevents corner 3. Mark to market: avoids default risk 4. Don’t have to del