衍生品與套期保值概述英文版

1、衍生品與套期保值概述英文版25.1 Forward Contracts A forward contract specifies that a certain commodity will be exchanged for another at a specified time in the future at prices specified today. Its not an option: both parties are expected to hold up their end of the deal. If you have ever ordered a textbook that

2、 was not in stock, you have entered into a forward contract.25.2 Futures Contracts: Preliminaries A futures contract is like a forward contract: It specifies that a certain commodity will be exchanged for another at a specified time in the future at prices specified today. A futures contract is diff

3、erent from a forward: Futures are standardized contracts trading on organized exchanges with daily resettlement (“marking to market”) through a clearinghouse.Futures Contracts: Preliminaries Standardizing Features: Contract Size Delivery Month Daily resettlement Minimizes the chance of default Initi

4、al Margin About 4% of contract value, cash or T-bills held in a street name at your brokerage.Daily Resettlement: An ExampleSuppose you want to speculate on a rise in the $/ exchange rate (specifically you think that the dollar will appreciate). Currently $1 = 140. Currency per U.S. $ equivalent U.S

5、. $WedTueWedTueJapan (yen)0.0071428570.0071942451401391-month forward0.0069930070.0070422541431423-months forward0.0066666670.0067114091501496-months forward0.006250.006289308160159The 3-month forward price is $1=150.Daily Resettlement: An Example Currently $1 = 140 and it appears that the dollar is

6、 strengthening. If you enter into a 3-month futures contract to sell at the rate of $1 = 150 you will make money if the yen depreciates. The contract size is 12,500,000 Your initial margin is 4% of the contract value:150$1012,500,00.04 $3,333.33 Daily Resettlement: An ExampleIf tomorrow, the futures

7、 rate closes at $1 = 149, then your positions value drops.Your original agreement was to sell 12,500,000 and receive $83,333.33:149 $1012,500,0062.892,83$You have lost $559.28 overnight.But 12,500,000 is now worth $83,892.62:150$1012,500,00 $83,333.33 Daily Resettlement: An Example The $559.28 comes

8、 out of your $3,333.33 margin account, leaving $2,774.05 This is short of the $3,355.70 required for a new position.149$1012,500,00.04 $3,355.70 Your broker will let you slide until you run through your maintenance margin. Then you must post additional funds or your position will be closed out. This

9、 is usually done with a reversing trade.Selected Futures ContractsContractContract SizeExchangeAgriculturalCorn5,000 bushelsChicago BOTWheat5,000 bushelsChicago & KCCocoa10 metric tonsCSCEOJ15,000 lbs.CTNMetals & PetroleumCopper25,000 lbs.CMX Gold100 troy oz.CMXUnleaded gasoline42,000 gal.NY

10、MFinancialBritish Pound62,500IMMJapanese Yen12.5 millionIMMEurodollar$1 millionLIFFEFutures Markets The Chicago Mercantile Exchange (CME) is by far the largest. Others include: The Philadelphia Board of Trade (PBOT) The MidAmerica Commodities Exchange The Tokyo International Financial Futures Exchan

11、ge The London International Financial Futures ExchangeThe Chicago Mercantile Exchange Expiry cycle: March, June, September, December. Delivery date 3rd Wednesday of delivery month. Last trading day is the second business day preceding the delivery day. CME hours 7:20 a.m. to 2:00 p.m. CST.CME After

12、Hours Extended-hours trading on GLOBEX runs from 2:30 p.m. to 4:00 p.m dinner break and then back at it from 6:00 p.m. to 6:00 a.m. CST. Singapore International Monetary Exchange (SIMEX) offer interchangeable contracts. Theres other markets, but none are close to CME and SIMEX trading volume.Wall St

13、reet Journal Futures Price QuotesOpenOpenHighLowSettleChangeHighLowInterestJuly179180178178-13121772,837Sept186186184186-280184104,900Dec196197194196-291194175,187Sept117-05117-21116-27117-05+5131-06 111-15647,560Dec116-19117-05116-12116-21+5128-28 111-0613,857Sept11200112851114511241-1711324787518,

14、530Dec11287113851125511349-171143079871,599LifetimeCorn (CBT) 5,000 bu.; cents per bu.TREASURY BONDS (CBT) - $1,000,000; pts. 32nds of 100%DJ INDUSTRIAL AVERAGE (CBOT) - $10 times averageExpiry monthOpening priceHighest price that day Lowest price that dayClosing priceDaily ChangeHighest and lowest

15、prices over the lifetime of the contract.Number of open contractsBasic Currency Futures Relationships Open Interest refers to the number of contracts outstanding for a particular delivery month. Open interest is a good proxy for demand for a contract. Some refer to open interest as the depth of the

16、market. The breadth of the market would be how many different contracts (expiry month, currency) are outstanding.25.3 Hedging Two counterparties with offsetting risks can eliminate risk. For example, if a wheat farmer and a flour mill enter into a forward contract, they can eliminate the risk each o

17、ther faces regarding the future price of wheat. Hedgers can also transfer price risk to speculators and speculators absorb price risk from hedgers. Speculating: Long vs. ShortHedging and Speculating ExampleYou speculate that copper will go up in price, so you go long 10 copper contracts for delivery

18、 in 3 months. A contract is 25,000 pounds in cents per pound and is at $0.70 per pound or $17,500 per contract. If futures prices rise by 5 cents, you will gain:Gain = 25,000 .05 10 = $12,500If prices decrease by 5 cents, your loss is: Loss = 25,000 -.05 10 = -$12,500Hedging: How many contacts?You a

19、re a farmer and you will harvest 50,000 bushels of corn in 3 months. You want to hedge against a price decrease. Corn is quoted in cents per bushel at 5,000 bushels per contract. It is currently at $2.30 cents for a contract 3 months out and the spot price is $2.05. To hedge you will sell 10 corn fu

20、tures contracts:Now you can quit worrying about the price of corn and get back to worrying about the weather.contracts 10contractper bushels 000, 5 bushels 000,5025.4 Interest Rate Futures Contracts Pricing of Treasury Bonds Pricing of Forward Contracts Futures Contracts Hedging in Interest Rate Fut

21、uresPricing of Treasury BondsConsider a Treasury bond that pays a semiannual coupon of $C for the next T years: The yield to maturity is rTTrrCrFPV)1 (11)1 (Value of the T-bond under a flat term structure= PV of face value + PV of coupon paymentsC0 1 2 3 2TCFC CPricing of Treasury BondsIf the term s

22、tructure of interest rates is not flat, then we need to discount the payments at different rates depending upon maturityTTrFCrCrCrCPV)1 ()1 ()1 ()1 (233221= PV of face value + PV of coupon paymentsC0 1 2 3 2TCFC CPricing of Forward ContractsAn N-period forward contract on that T-Bond C0 NN+1 N+2 N+3

23、 N+2TCFC CforwardPCan be valued as the present value of the forward price.NNTTNNNNrrFCrCrCrCPV)1 ()1 ()1 ()1 ()1 (233221NNforwardrPPV)1 ( Futures Contracts The pricing equation given above will be a good approximation. The only real difference is the daily resettlement.Hedging in Interest Rate Futur

24、es A mortgage lender who has agreed to loan money in the future at prices set today can hedge by selling those mortgages forward. It may be difficult to find a counterparty in the forward who wants the precise mix of risk, maturity, and size. Its likely to be easier and cheaper to use interest rate

25、futures contracts however.25.5 Duration Hedging As an alternative to hedging with futures or forwards, one can hedge by matching the interest rate risk of assets with the interest rate risk of liabilities. Duration is the key to measuring interest rate risk. Duration measures the combined effect of

26、maturity, coupon rate, and YTM on bonds price sensitivity Measure of the bonds effective maturity Measure of the average life of the security Weighted average maturity of the bonds cash flows25.5 Duration HedgingDuration FormulaNtttNtttTrCrtCDPVTCPVCPVCPVD1121)1 ()1 ()(2)(1)(Calculating DurationCalc

27、ulate the duration of a three-year bond that pays a semi-annual coupon of $40, has a $1,000 par value when the YTM is 8% semiannually?DiscountPresentYears x PVYearsCash flowfactorvalue/ Bond price0.5$40.000.96154$38.460.01921$40.000.92456$36.980.03701.5$40.000.88900$35.560.05332$40.000.85480$34.190.

28、06842.5$40.000.82193$32.880.08223 $1,040.000.79031$821.932.4658$1,000.002.7259 yearsBond price Bond durationCalculating DurationDuration is expressed in units of time; usually years.DurationThe key to bond portfolio management Properties: Longer maturity, longer duration Duration increases at a decr

29、easing rate Higher coupon, shorter duration Higher yield, shorter durationZero coupon bond: duration = maturity25.6 Swaps Contracts: Definitions In a swap, two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals. There are two types of in

30、terest rate swaps: Single currency interest rate swap “Plain vanilla” fixed-for-floating swaps are often just called interest rate swaps. Cross-Currency interest rate swap This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies.The Swap Bank A swap bank is

31、 a generic term to describe a financial institution that facilitates swaps between counterparties. The swap bank can serve as either a broker or a dealer. As a broker, the swap bank matches counterparties but does not assume any of the risks of the swap. As a dealer, the swap bank stands ready to ac

32、cept either side of a currency swap, and then later lay off their risk, or match it with a counterparty. An Example of an Interest Rate Swap Consider this example of a “plain vanilla” interest rate swap. Bank A is a AAA-rated international bank located in the U.K. and wishes to raise $10,000,000 to

33、finance floating-rate Eurodollar loans. Bank A is considering issuing 5-year fixed-rate Eurodollar bonds at 10 percent. It would make more sense to for the bank to issue floating-rate notes at LIBOR to finance floating-rate Eurodollar loans.An Example of an Interest Rate Swap Firm B is a BBB-rated U

34、.S. company. It needs $10,000,000 to finance an investment with a five-year economic life. Firm B is considering issuing 5-year fixed-rate Eurodollar bonds at 11.75 percent. Alternatively, firm B can raise the money by issuing 5-year floating-rate notes at LIBOR + percent. Firm B would prefer to bor

35、row at a fixed rate.An Example of an Interest Rate SwapThe borrowing opportunities of the two firms are: COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR An Example of an Interest Rate SwapBank AThe swap bank makes this offer to Bank A: You pay LIBOR 1/8 % per year on $10 milli

36、on for 5 years and we will pay you 10 3/8% on $10 million for 5 years COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR Swap BankLIBOR 1/8%10 3/8% COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR An Example of an Interest Rate SwapHeres whats in it for Bank

37、 A: They can borrow externally at 10% fixed and have a net borrowing position of -10 3/8 + 10 + (LIBOR 1/8) =LIBOR % which is % better than they can borrow floating without a swap. 10% of $10,000,000 = $50,000. Thats quite a cost savings per year for 5 years.Swap BankLIBOR 1/8%10 3/8%Bank AAn Exampl

38、e of an Interest Rate SwapCompany BThe swap bank makes this offer to company B: You pay us 10% per year on $10 million for 5 years and we will pay you LIBOR % per year on $10 million for 5 years.Swap Bank10 %LIBOR % COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR COMPANY B BAN

39、K A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR An Example of an Interest Rate SwapThey can borrow externally at LIBOR + % and have a net borrowing position of 10 + (LIBOR + ) - (LIBOR - ) = 11.25% which is % better than they can borrow floating. LIBOR + %Heres whats in it for B: % of $10,

40、000,000 = $50,000 thats quite a cost savings per year for 5 years.Swap BankCompany B10 %LIBOR %An Example of an Interest Rate SwapThe swap bank makes money too.% of $10 million = $25,000 per year for 5 years.LIBOR 1/8 LIBOR = 1/8 10 - 10 3/8 = 1/8 Swap BankCompany B10 %LIBOR %LIBOR 1/8%10 3/8%Bank A

41、 COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR An Example of an Interest Rate SwapSwap BankCompany B10 %LIBOR %LIBOR 1/8%10 3/8%Bank AB saves %A saves %The swap bank makes % COMPANY B BANK A Fixed rate 11.75% 10% Floating rate LIBOR + .5% LIBOR An Example of a Currency Swap

42、Suppose a U.S. MNC wants to finance a 10,000,000 expansion of a British plant. They could borrow dollars in the U.S. where they are well known and exchange for dollars for pounds. This will give them exchange rate risk: financing a sterling project with dollars. They could borrow pounds in the inter

43、national bond market, but pay a premium since they are not as well known abroad.An Example of a Currency Swap If they can find a British MNC with a mirror-image financing need they may both benefit from a swap. If the spot exchange rate is S0($/) = $1.60/, the U.S. firm needs to find a British firm

44、wanting to finance dollar borrowing in the amount of $16,000,000.An Example of a Currency SwapConsider two firms A and B: firm A is a U.S.based multinational and firm B is a U.K.based multinational.Both firms wish to finance a project in each others country of the same size. Their borrowing opportun

45、ities are given in the table below. $ Company A 8.0% 11.6% Company B 10.0% 12.0% $9.4%An Example of a Currency Swap $ Company A 8.0% 11.6% Company B 10.0% 12.0% Firm B$8%12%Swap BankFirm A11%$8% 12%An Example of a Currency Swap$8%12% $ Company A 8.0% 11.6% Company B 10.0% 12.0% Firm BSwap BankFirm A

46、11%$8%$9.4% 12%As net position is to borrow at 11%A saves .6%An Example of a Currency Swap$8%12% $ Company A 8.0% 11.6% Company B 10.0% 12.0% Firm BSwap BankFirm A11%$8%$9.4% 12%Bs net position is to borrow at $9.4%B saves $.6%An Example of a Currency Swap$8%12% $ Company A 8.0% 11.6% Company B 10.0

47、% 12.0% Firm BThe swap bank makes money too:At S0($/) = $1.60/, that is a gain of $124,000 per year for 5 years.The swap bank faces exchange rate risk, but maybe they can lay it off (in another swap).1.4% of $16 million financed with 1% of 10 million per year for 5 years.Swap BankFirm A11%$8%$9.4% 12%Variations of Basic Swaps Currency Swaps fixed for fixed fixed for floating floating for floating amortizing Interest Rate Swaps