An Introduction To The Use Of Derivatives In

An Introduction To The Use Of Derivatives In - An...

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Unformatted text preview: An Introduction To The Use Of Derivatives In Portfolio Restructuring Asset Portfolios With Management • Forward Contracts – – – Switching funds between current equity holding and other portfolios mimicking different asset classes Tactical asset allocation to time general market movements instead of companyspecific trends Hedge position with payoffs that are negatively correlated with existing 20-1 An Introduction To The Use Of Derivatives In Portfolio Protecting Portfolio Value With Put Management • Options – – – The purpose is to have a derivative contract that allows stock sales when prices fall but keep the stock when prices rise The purchase of a put option to hedge the downside risk of an underlying security holding is called a protective put position Methods • • Hold the shares and purchase a put option, or 20-2 Exhibit 20.23 20-3 An Introduction To The Use Of Derivatives In Portfolio An Alternative Way to Pay for a Management • Protective Put – – Collar Agreement: The simultaneous purchase of an out-of-the-money put and sale of an out-of-the-money call on the same underlying asset and with the same expiration date and market price There is no initial cost to construct a strategy to protect against potential stock price declines by surrendering the potential future stock gains 20-4 Exhibit 20.25 20-5 The Internet Investments Online • http://www.cboe.com • http://www.cmegroup.com • http://www.onechicago.com • http://www.euronext.com • http://www.schaeffersresearch.com • http://www.eurexus.com • http://www.ise.com • http://www.site-by-site.com/usa/optfut.htm 20-6 ...
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An Introduction To The Use Of Derivatives In - An...

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