03rec4

03rec4 - 15.407 Recitation October 9 2003 MIT Sloan School of Management Things to cover today Forwards and Futures 1 Questions about Equity

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15.407 Recitation October 9, 2003
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MIT Sloan School of Management Things to cover today: Forwards and Futures: 1. Questions about Equity pricing? 2. Forwards and Futures - Market Convention 3. Pricing 4. Hedging
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Definitions: Forwards : A commitment to purchase at a future date a given amount of a commodity or an asset at a price agreed on today. Futures : An exchange-traded, standardized, forward-like contract that is marked to the mar- ket daily. This contract can be used to estab- lish a long (or short) position in the underlying asset. Example of a future contracts: 30 Year T-bond future on CBOT. Contract Size : One U.S. Treasury bond hav- ing a face value at maturity of $100,000 or multiple thereof. Deliverable Grades : U.S. Treasury bonds that, if callable, are not callable for at least 15 years from the first day of the delivery month or, if not callable, have a maturity of at least 15 years from the first day of the delivery month. The invoice price equals the futures settlement price times a conversion factor plus accrued in- terest. The conversion factor is the price of the
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delivered bond ($1 par value) to yield 6 per- cent. Tick Size : 1/32 of a point ($31.25/contract); par is on the basis of 100 points Price Quote : Points ($1,000) and thirty-seconds of a point; for example, 80-16 equals 80 16/32 Contract Months : Mar, Jun, Sep, Dec Last Trading Day : Seventh business day pre- ceding the last business day of the delivery month. Last Delivery Day
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This note was uploaded on 01/19/2011 for the course 15 15.407 taught by Professor Wang during the Fall '03 term at MIT.

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03rec4 - 15.407 Recitation October 9 2003 MIT Sloan School of Management Things to cover today Forwards and Futures 1 Questions about Equity

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