Test Bank: Chapter 5
The Determinants of Forward and Futures Prices
1. An investor shorts 100 shares when the share price is $50 and closes out the position
six months later when the share price is $43. The shares pay a dividend of $3 per
share during the
Swaps
Swaps
Chapter 7
Options, Futures, and Other
Derivatives, 7th Edition, Copyright
John C. Hull 2008
1
Nature of Swaps
A swap is an agreement to exchange
cash flows at specified future times
according to certain specified rules
Options, Futures, and O
CHAPTER 7
Swaps
Practice Questions
Problem 7.8.
Explain why a bank is subject to credit risk when it enters into two offsetting swap contracts.
At the start of the swap, both contracts have a value of approximately zero. As time passes, it
is likely that
Test Bank: Chapter 10
Properties of Stock Options
1. Which of the following are always positively related to the price of a European
call option on a stock (circle three)
(a) The stock price
(b) The strike price
(c) The time to expiration
(d) The volatili
Chapter 9 - Mechanics of Options Markets
Types of options
Option positions and profit/loss diagrams
Underlying assets
Specifications
Trading options
Margins
Taxation
Warrants, employee stock options, and convertibles
Types of options
Two types of options:
Intro
Option Strategy Analysis Model
BUS 895 - Options
Professor Paul Koch
University of Kansas
April 27, 1996
William Gessley
Comments: [email protected]
Page 1
PayoffTable
Payoff Table
#1:1(+P)@60 #2:2(-P)@50
Min to 50 54 - 1St
-94 + 2St
50 to
1
Hull, Ch. 11 Trading Strategies Involving Options
I. Basic Combinations.
A. Call and Put Options can be combined with the other building blocks
(Stocks and Bonds) to provide almost any payoff pattern desired.
1. For simplicity, assume European call & pu
1
Hull, Ch 7 SWAPs;
I. Interest Rate SWAPs.
A. Mechanics of Interest Rate SWAPs.
1.
Example 1;
Interest Rate SWAPs.
a.
Consider the following opportunities for companies A & B:
Fixed
Floating .
Company A
10.0%
LIBOR + 0.3%
Company B
11.2%
LIBOR + 1.0%
Dif
550.444
Introduction to Financial
Derivatives
Where we are
Previously: Interest Rate Futures (Chapter 6,
OFOD) and FRAs
Last Week: Mid Term (& Review)
This Week: Swaps (Chapter 7, OFOD)
Next Week: Option Markets and Stock Options
(Chapter 8-9, OFOD)
W
2011 CAS Exam 9 Study Manual Excerpt
Richard Goldfarb, FCAS, CFA, FRM
Version: January 1, 2012
3
Introduction
5
About the Author
11
Printing and Binding Recommendations
13
2012 Seminar Details
15
Part 1. Portfolio Theory
19
BKM Chapter 7: Optimal Risky Po
CHAPTER 5: SWAPS
Swaps are private agreements between two companies to exchange cash flows in the future according to a prearranged
formula. They can be regarded as portfolios of forward contracts.
5.1 Mechanics of Interest Rate Swaps
The most common type
CHAPTER 14 INTEREST RATE AND CURRENCY SWAPS
SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER
QUESTIONS AND PROBLEMS
QUESTIONS
1. Describe the difference between a swap broker and a swap dealer.
Answer: A swap broker arranges a swap between two counterpar
Chp 7
Determining Swap/Zero Rate
Use libor rates as risk-free rates used to price futures
Extend LIBOR rates past 12 months via Eurodollar Futures
Traders use swap rates to extend LIBOR zero curve further
How to determine the Curve
New Float bond is alwa
Lecture 9. Swaps
Introduction to Swaps
Options, Futures, Derivatives 10/03/07
back to start
1
Swaps
A swap is an agreement between two companies to exchange cash flows in the future. An agreement includes the dates when the cash flows are paid and the wa
1
Glossary of Financial Derivatives*
Paul D. Koch
University of Kansas
Lawrence, KS 66045
[email protected]
785-864-7503
*This document draws heavily from several sources:
(a) Website of Don Chance, www.fbox.vt.edu/filebox/business/finance/dmc/DRU;
(b) Hull, J
3.ForwardandFuturesPrices
n
Summary
n
n
n
n
n
n
n
n
ShortSelling
TheRepoRate
ForwardContracts
ForwardPricevs.FuturesPrice
StockIndexFutures
ForwardandFuturesContractsonCurrencies
ForwardandFuturesContractson
Commodities
1
CostofCarryModelandConvenienceYie
4.HedgingUsingFutures
n
Summary
n
n
n
n
n
n
WhyHedge
HowtoHedge
BasisRisk
OptimalHedgeRatio
HedgingUsingStockIndexFutures
RollingTheHedgeForward
1
WhyHedge?
n
n
Objective:Neutralizetherisk
Anexample:
n
n
Afirmisduetosellanassetataparticular
timeinthefutur
CHAPTER 14
Employee Stock Options
Practice Questions
Problem 14.8.
Explain how you would do the analysis to produce a chart such as the one in Figure 14.2.
It would be necessary to look at returns on each stock in the sample (possibly adjusted for the
ret
CHAPTER 13
Valuing Stock Options: The Black-Scholes-Merton Model
Practice Questions
Problem 13.8.
A stock price is currently $40. Assume that the expected return from the stock is 15% and its
volatility is 25%. What is the probability distribution for the
CHAPTER 12
Introduction to Binomial Trees
Practice Questions
Problem 12.8.
Consider the situation in which stock price movements during the life of a European option
are governed by a two-step binomial tree. Explain why it is not possible to set up a posi
CHAPTER 11
Trading Strategies Involving Options
Practice Questions
Problem 11.8.
Use putcall parity to relate the initial investment for a bull spread created using calls to the
initial investment for a bull spread created using puts.
A bull spread using
CHAPTER 10
Properties of Stock Options
Practice Questions
Problem 10.8.
Explain why the arguments leading to putcall parity for European options cannot be used to
give a similar result for American options.
When early exercise is not possible, we can argu
CHAPTER 9
Mechanics of Options Markets
Practice Questions
Problem 9.8.
A corporate treasurer is designing a hedging program involving foreign currency options.
What are the pros and cons of using (a) the NASDAQ OMX and (b) the over-the-counter
market for