MyFinanceLab Ch. 20

MyFinanceLab Ch. 20 - is thereby negated Call options/ put...

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MyFinanceLab: Ch. 20 Forward contracts: o Long position: Buyer o Short position: Seller Hedged annual profits: o =Unhedged annual profits + profit/loss on futures contract Effect of margin requirement (marked to market): o B/c both parties have to post margin when they enter into futures contract and b/c they mark to market every day until the delivery date, we are assured the party and counterparty to contract have already posted gain/ loss to the other and risk of default
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Unformatted text preview: is thereby negated Call options/ put options: o See graphs in book Current value of option: o Current stock price strike price Future value of option: o Black Scholes model Swap contracts: o Fixed payment: (Fixed rate/ 2) x notional amount o Floating payment: [(previous period LIBOR + basis points)/ 2] x notional amount o Eliminate exposure to changing interest rates by switching from floating to fixed...
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This note was uploaded on 06/11/2011 for the course BUSI 408 taught by Professor Croce during the Spring '08 term at UNC.

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