Tut 9 - Derivatives Markets 1

Tut 9 - Derivatives Markets 1 - BANK1005 Derivatives and...

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BANK1005 Derivatives and Securities Markets Page 1 of 5 Tutorial 9 (Week 12) – Derivatives Markets 1 (Forward and Futures Contacts) © HB, October 2006 Preparation for This Tutorial You should complete your study for this tutorial by using the relevant lecture notes, textbook and other resources. Have a good understanding of the key words used in this tutorial. In particular, for this tutorial you should: s Read your notes and the textbook to understand how forward and futures contracts are used for hedging. What is a hedge? s You should know the meaning of the key terms, especially the ones used in these tutorial activities. s IMPORTANT: Record the formulas that you will need for the calculations for FRAs and futures agreements. Activity 1 Bank Bill Futures Contract Let us first understand how a bank bill futures contract works. We use the following information from a daily newspaper: SFE BENCHMARK FUTURES 90-Day Bank Bills (100 minus yield % p.a.) First Trade Settlement Price Volume Prev. O/P Dec 06 93.73 93.73 31897 179933 Mar 07 93.73 93.73 42527 236786 Jun 07 93.73 93.73 16715 83191 Sep 07 93.75 93.76 4875 42147 Dec 07 93.77 93.78 1235 31063 Mar 08 93.80 93.79 1761 15683 Jun 08 93.81
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Tut 9 - Derivatives Markets 1 - BANK1005 Derivatives and...

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