Ch05 - Determination of Forward and Futures Prices Chapter...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.1 Determination of Forward and Futures Prices Chapter 5
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.2 Consumption vs Investment Assets z Investment assets are assets held by significant numbers of people purely for investment purposes (Examples: gold, silver) z Consumption assets are assets held primarily for consumption (Examples: copper, oil)
Background image of page 2
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.3 Short Selling (Page 97-99) z Short selling involves selling securities you do not own z Your broker borrows the securities from another client and sells them in the market in the usual way
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.4 Short Selling (continued) z At some stage you must buy the securities back so they can be replaced in the account of the client z You must pay dividends and other benefits the owner of the securities receives
Background image of page 4
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.5 Notation S 0 : Spot price today F 0 : Futures or forward price today T : Time until delivery date r : Risk-free interest rate for maturity T
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.6 1. Gold: An Arbitrage Opportunity? z Suppose that: z The spot price of gold is US$600 z The quoted 1-year futures price of gold is US$650 z The 1-year US$ interest rate is 5% per annum z No income or storage costs for gold z Is there an arbitrage opportunity?
Background image of page 6
Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 5.7 2. Gold: Another Arbitrage Opportunity?
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 23

Ch05 - Determination of Forward and Futures Prices Chapter...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online