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1FNCE 90011, Semester 2 2017Thijs van der HeijdenLecture 3: More on the Cost-of-Carry; Hedging
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2FNCE 90011, Semester 2 2017Thijs van der HeijdenLast week•Use arbitrage to work out relation between spotand forwardprice: invest in spot market using borrowing/lending as financing, and take opposite position in derivative contract(Reverse) cash-and-carryAccounting for differential borrowing/lending ratesTransaction costs•Futuresmarkets:Standardization facilitates anonymous tradingClearinghouse guarantees performance of contractsBuyer to every seller, seller to every buyerMargin accountMark-to-market