國(guó)際金融seminar 2

1、大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Seminar 2Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#1 Topic 8vWhich risk management technique has been chosen in each of the following situations? Installing a smoke detector in your home Investing savings in T-bills rather than in stocks Deciding not to pu

2、rchase collision insurance on your car Purchasing a life insurance policy for yourself2Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Selection of risk-management techniquesvRisk avoidance Avoid going into certain professionsvLoss prevention and control Reduce the exposure to the risk of illnes

3、svRisk retention Save for illnessvRisk transfer Buy insurance3Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer: Loss prevention and control. Risk avoidance Risk retention Risk transfer4Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#2 Topic 9vNote whether the following are ways to avo

4、id losses through hedging or insuring: Purchase a put option on a stock you do own. Agree to purchase a house in one year for a fixed price of $200,000. Lease a car with an option to purchase it in three years. Enter into a swap contract to exchange fixed interest payments for floating-rate payments

5、 because you have floating-rate assets. As a wheat grower, enter into a forward contract to sell your wheat in two months at a fixed price set today. Pay a premium for catastrophic health care coverage.5Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:v Purchase a put option on a stock you

6、 do own. (Insuring)v Agree to purchase a house in one year for a fixed price of $200,000. (Hedging)v Lease a car with an option to purchase it in 3 years. (Insuring)v Enter into a swap contract to exchange fixed interest payments for floating-rate payments because you have floating-rate assets. (Hed

7、ging)v As a wheat grower, enter into a forward contract to sell your wheat in 2 months at a fixed price set today. (Hedging)v Pay a premium for catastrophic health care coverage. (Insuring)6Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#3 Topic 10vSuppose an investor invests 75% in the tangenc

8、y portfolio and 25% in the riskless asset. What is the expected rate of return and standard deviation of this portfolio? If the investor has $100,000, how much will he invest in Risky Asset 1, Risky Asset 2 and riskless asset?7Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:8fsrrErE25. 0)

9、(75. 0)(s75. 0Weight in riskless asset25%Weight in Risky Asset 10.75 Weight in Risky Asset 20.75Total100%1w2wFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#4 Topic 11vWith a riskless rate of 0.06, an equity market premium of 0.05, and a Capital Market Line of slope 0.75, we can infer what abou

10、t the risk of the market portfolio?9Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe CML is given by:vWorking with the slope of the capital market line we know:10MfMfrrErrE)()(%67. 6,75. 0%5,75. 0%5MMMFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#5 Topic 11vIf the Treasury bill

11、 rate is currently 0.04 and the expected return to the market portfolio over the same period is 0.12, determine the risk premium on the market. If the standard deviation of the return on the market is 0.20, what is the equation of the Capital Market Line?11Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸

12、管理學(xué)院 王冰王冰Answer:vThe CML is given by:vHere we have:12MfMfrrErrE)()(4 . 0%4)(2 . 0%4%12%4)(rErEFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#6 Topic 11vSuppose the risk-free rate is 0.10 and a security with a beta of +1 has an equilibrium expected rate of return of 0.15. What is the equity mar

13、ket premium?13Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe SML is given by:vPlugging in what we know:vSo the equity market premium is 5%.14fMifirrErrE)()(%15)(%10)(*1%10%15MMrErEFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#7 Topic 11vConsider a portfolio exhibiting an expe

14、cted return of 0.20 in an economy in which the riskless interest rate is 0.08, the expected return to the market portfolio is 0.13, and the standard deviation of the return to the market portfolio is 0.25. Assuming this portfolio is efficient, determine: its beta. the standard deviation of its retur

15、n. its correlation with the market return.15Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe SML is given by:vPlugging in what we know:vSo the beta is 2.4.16fMifirrErrE)()(4 . 2%8%13%8%20iiFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe CML is given by:vHere we have:vT

16、he risk of the security is 60%17MfMfrrErrE)()(6 . 0%25%8%13%8%20Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe securitys returns are perfected correlated with the returns of the market portfolio.181%25%604 . 222iMiMMiMiMiMMiMiMiFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#8

17、Topic 11v There are only two risky assets in the economy: stocks and real estate and their relative supplies are 50% stocks and 50% real estate. Thus, the market portfolio will be half stocks and half real estate. The standard deviations are 0.20 for stocks, 0.20 for real estate, and the correlation

18、 between them is zero. The market portfolios expected return is 0.14. The riskless rate is 0.08 per year. According to the CAPM what must be the equilibrium risk premium on the market portfolio, on stocks, and on real estate? Draw the Capital Market Line. What is its slope? Draw the SML. What is its

19、 formula?19Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe market risk premium is 14% 8% = 0.06 or 6%.vThe market portfolios expected rate of return is also a weighted average of the expected rates of return on stocks and real estate, where the weights are each 1/2. Stocks and real e

20、state must have the same risk premium.201414. 02 . 0*5 . 0*2)1 (2)1 (22212, 12222122mmwwwwFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe CML is given by:vCML slope:21MfMfrrErrE)()(4243. 0)(MfMrrEFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:22Financial Economics大連海事大學(xué)交通

21、運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe SML is given by:vSML slope:14% - 8% = 0.0623fMifirrErrE)()(Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:24Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#9 Topic 11vSuppose a companys current dividend of $1.50 per share is expected to grow at a

22、 constant 0.05 rate into the indefinite future. In capital markets the market risk premium is 0.08 and the risk-free rate is 0.02. If the stable beta of the companys stock is 0.8, what is the estimated current stock price?25Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:v First calculate

23、 the companys expected rate of return from:v Now using the constant-growth-rate discounted dividend model we obtain:26084. 0)()()(ifMifirErrErrE32.46%5%4 . 8%)51 (5 . 1)1 (0100PgkDgkgDPFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#10 Topic 12vInfer the spot price of an ounce of gold if you ob

24、serve the price of one ounce of gold for forward delivery in three months is $435.00, the interest rate on a 91-day Treasury bill is 1% and the quarterly carrying cost as a percentage of the spot price is 0.2%.27Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vDeduce from the futures pric

25、e parity condition for gold:2884.429100SSsrFfFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#11 Topic 12vSuppose the current spot price of a riskless zero-coupon bond with one year to maturity is $94.34 per $100 of face value. If a non-dividend-paying stock is currently selling for $37.50 per s

26、hare what is implied about its forward price for delivery in one year? Use the forward-spot price-parity relationship.29Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe riskless rate is:vThe forward share price should be:3075.39%)61 (5 .37)1 (frSF%6134.94100Financial Economics大連海事大學(xué)交通

27、運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#12 Topic 12vThe share price of Schleifer and Associates, a financial consultancy in Moscow, is currently 10,000 rubles whereas the forward price for delivery of a share in 182 days is 11,000 rubles. If the yield on a riskless zero-coupon security with term to maturity of 18

28、2 days is 15%, infer the expected dividend to be paid by Schleifer and Associates over the next six months.31Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vThe implied dividend is given by:3250011000%)151 (100001FSrDFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#13 Topic 13vShow h

29、ow one can synthesize a share of the stock using a put, a call, and a pure discount bond with a face value of E.33Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:vOne can create a synthetic share of stock by purchasing a pure discount bond with a face value of E, purchasing a call, and se

30、lling a put.34CrEPST)1 (Financial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰Answer:35Value of position at maturity datePositionIf ST EPure discount bond with face value of EEELong a Call0 ST - EShort a putST - E0Pure discount bond plus call minus put ST STFinancial Economics大連海事大學(xué)交通運(yùn)輸管理學(xué)院大連海事大學(xué)交通運(yùn)輸管理學(xué)院 王冰王冰#14 Topic 13vGraph the payoff to a portfolio of one European call option and one European put option, each with the same expiration date and each with