商业银行管理Chap008.pptVIP

Financial Futures Contracts: Promises of Future Security Trades at a Preset Price (continued) Futures contracts are also traded over the counter (OTC) Often less costly for traders These are most often called forward contracts Forward contracts Generally more risky – counterparty risk and liquidity risk Terms are negotiated between parties Do not necessarily involve standardized assets Require no cash exchange until expiration No marking to market Financial Futures Contracts: Promises of Future Security Trades at a Preset Price (continued) Most common financial futures contracts U.S. Treasury Bond Futures Contracts Three-Month Eurodollar Time Deposit Futures Contract 30-Day Federal Funds Futures Contracts One Month LIBOR Futures Contracts EXHIBIT 8–2 Sample Market Prices for Interest-Rate Futures in Recent Years Financial Futures Contracts: Promises of Future Security Trades at a Preset Price (continued) Short Futures Hedge Process Today – contract is sold through an exchange Sometime in the future – contract is purchased through the same exchange Results – the two contracts are cancelled out by the futures clearinghouse Gain or loss is the difference in the price purchased for (at the end) and the price sold for (at the beginning) Financial Futures Contracts: Promises of Future Security Trades at a Preset Price (continued) Long Futures Hedge Process Today – contract is purchased through an exchange Sometime in the future – contract is sold through the same exchange Results – the two contracts are cancelled by the clearinghouse Gain or loss is the difference in the purchase price (at the beginning) and the price sold for (at the end) Financial Futures Contracts: Promises of Future Security Trades at a Preset Price (continued) The three most typical interest-rate hedging problems financial firms face are Protecting the value of securities and fixed-rate loans from losses due to rising interest rates Avoiding a rise in borrowing costs Avoiding a fall in the inter