Finance 5108, TUCC Fall 2009 Derivatives
Instructor: Bruce B. Rader Office Hours: Tuesday 2:00-3:00 PM Main campus or by appointment Main Campus Alter Hall 430 Central: (215) 204-5231 Email: [email protected] The objective of this course is to introduce t
Notes 11 Interest Rate Swaps
Learning Objectives 1. Understand the basics of plain Vanilla interest rate swaps. You should be able to set up the swap. 2. Understand the ability of swaps to transform the liabilities of a firm 3. Be able to introduce a swap
1
CHAPTER 1
Introduction
Practice Questions
Problem 1.8.
Suppose you own 5,000 shares that are worth $25 each. How can put options be used to
provide you with insurance against a decline in the value of your holding over the next four
months?
You should b
Finance 3506
Fall 2014
Homework 4 due 10/21/2014
1. You have been asked to value an European put with a strike price of 30 on
ABC stock that is trading at $28 using a two period 8-month (each period is 4
months) binomial pricing model. You have estimated
Finance 3506
Fall 2014
Homework 2 due 09/23/2014
1. You have been asked to hedge the purchase oil for you company. Your
company needs to purchase 50,000 barrels of crude oil in November. This
crude is currently trading at $98 per barrel. You have run regr
Finance 3506
Fall 2014
Homework 3 due 10/14/2014
1. You been asked to describe the outcome of an option strategy by a client. The
best way to do this is through a profit profile. The following portfolio is what
needs to be described: Buy 500 Shares of BTU
Extra Problem Exam 2
Finance 3506
1. You have been asked to construct a profit profile for the following option strategy to
demonstrate the payout for the strategy.
Buy 1500 Shares of XYZ @ $30 per share
Write (sell to open) 15 December 30 calls @ $5.35
W
Extra Problem Exam 2
Finance 3506
1. You have been asked to construct a profit profile for the following option strategy to
demonstrate the payout for the strategy.
Buy 1500 Shares of XYZ @ $30 per share
Write (sell to open) 15 December 30 calls @ $5.35
W
Finance 3506 A (2:00 PM- 3:20 PM)
Fall 2014
Derivatives and Financial Risk Management
Instructor: Dr. Bruce B. Rader
Office Hours: Tu/Th. 12:00 AM-1:45 PM, or by appointment
Main Campus: Alter Hall 430
Central: (215) 204-5231
Email: [email protected]
Cour
Extra Question Exam 1
Finance 3506
1. You are short 5 T-bond futures contract for which the initial margin is $4320 and the
maintenance margin is $3200 (note these is per contract as they always will be given
in). If you initially had $25,000 in equity in
Extra Question Exam 1
Finance 3506
1. You are short 5 T-bond futures contract for which the initial margin is $4320 and the
maintenance margin is $3200 (note these is per contract as they always will be given
in). If you initially had $25,000 in equity in
1. Company A can issue 3 year debt at 6% and variable rate debt at LIBOR + 1.
Company B can issue 3 year debt at 9% and variable rate debt at LIBOR + 2. Set up a
swap that allows for the advantage to entering a swap to be shares equally between
A&B. Assum
1. Calculate the profit profile for the following option strategy:
Sell 2 June 50 XYX Puts @ 6.25
Buy 2 June 45 XYX Puts @ 2.25
Sell 2 June 45 XYZ Calls @ 4
2. Calculate the replicating portfolios at each node using a two period binomial
pricing model for
Sample question for the final in Fina218
1. The S&P 500 futures contract trades in $500 times the index. The initial margin is 15,000
and the maintenance level is $12,500. If you went long at 800.05 calculate if there is a margin
call in your account if t
Sample question for the final in Finance 218
1. The S&P 500 futures contract trades in $500 times the index. The initial margin is 15,000
and the maintenance level is $12,500. If you went long at 800.05 calculate if there is a margin
call in your account
Sample question for the final in Finance 218
1. The S&P 500 futures contract trades in $500 times the index. The initial margin is 15,000
and the maintenance level is $12,500. If you went long at 800.05 calculate if there is a margin
call in your account
1
CHAPTER 5
Determination of Forward and Futures Prices
Practice Questions
Problem 5.8.
Is the futures price of a stock index greater than or less than the expected future value of the
index? Explain your answer.
The futures price of a stock index is alwa
1
CHAPTER 3
Hedging Strategies Using Futures
Practice Questions
Problem 3.8.
In the Chicago Board of Trades corn futures contract, the following delivery months are
available: March, May, July, September, and December. State the contract that should be
us
Finance 5108 Notes 10
Learning Objectives 1. Understand the particulars of the Bond markets and how they trade 2. Know the aspects of the T-bond futures and T-note futures contract contracts, how they trade and what makes them different 3. Understand the
Finance 5108 Notes 12 Credit Risk and Credit Derivatives
Learning objectives 1. Understand ratings and the system of rating for bonds 2. Understand and be able to use historical information on defaults and recoveries 3. Probabilities of default and bond r
Notes 13 Interest Rate Derivatives: Standard Model
Learning objectives 1. Understand the use of the Black Model and it validity in the pricing of options 2. Have knowledge of the different type of embedded options 3. Be able to apply the Black Model to va
Sample Exam Problems (Questions) Exam 1 Finance 5108
1. Contrast a futures contract with a forward contract. Forward Future Private btn 2 parties Traded on exchange Not stdized std contract Usually one specified delivery date range of delivery dates Settl
Sample Questions Exam 2 Finance 5108 1. The Black-Scholes-Merton is based on certain assumptions. What are those assumptions? 2. What is the value of a call option on a non dividend paying stock that has a strike price of $50, the stock is currently tradi
Sample Questions Exam 2 Finance 5108 1. The Black-Scholes-Merton is based on certain assumptions. What are those assumptions? 1.Security prices follow a Weiner process that depends on the following equation. dS = S dt + S dt . This is a process in which s
1. 03/03/05 Sell 50 March 05 10 year T-Note Futures Executed at 109:24 03/07/05 Buy 50 March o5 10 year T-Note Futures Executed at 110:05 Loss $20,262.50 Explanation: The expectations for tomorrows unemployment statistics are an increase of nonfarm payrol
Technical analysis Use past price movements and volume to predict the future movement in the markets. This is an attempt at seeing unfolding patterns in the data to get some indication of the future path of the security or asset. Simple Approaches 1. Supp
Derivatives, Introduction Types 1. Forward contracts A forward contract is a contract that is an agreement to buy or sell some commodity sometime in the future. The terms of the contract are specific to the individual. This is not to be confused with the
Notes 2 Finance 5108 Basic concept is that hedgers take the opposite position in the futures market than they have in the cash market. If they are long in the cash market they would short the futures (Short hedge) and if they are short in the cash market
Notes 3 Finance 5108
1. Financial without interim cash flows The basic concept in the valuation of futures or forward contracts is the concept of no arbitrage pricing. The basic model is generally called the cost of carry model. The other side of this arg