Tutorial 1
Question 1
Suppose that you enter into a short futures contract to sell July silver for $10.20
per ounce on the New York Commodity Exchange. The size of the contract is
5,000 ounces. The initial margin is $ 4,000, and the maintenance margin is
Swap Pricing and Currency
Swaps
Lecture 6
Nature of Swaps
A swap is an agreement to exchange cash flows
in the future according to a pre-arranged formula
specifying:
Start date
Notional principal
Lifetime
Examples of swaps
Cash receipts in US Dollars for
Pricing European and American Options
Lecture 3
To value American options on dividend-paying stocks
we can also use the Binomial Model
The Two-period Binomial tree again
Cu
C
q
1-q
Cd
q
1-q
q
1-q
Cuu = maxcfw_0, u2 S-X
Cud
Cdu = maxcfw_0, udS-X
Cdd = maxc
Mechanics of Futures
and Forward Markets
Lecture 7
2.1
Futures Contracts
Definition: Agreement to buy or sell an asset for a certain
price at a certain time in the future
Specifications need to be defined:
What can be delivered
Where it can be delivered
The gender pay gap the gap between male and female hourly earnings captures enduring
gendered inequalities that exist on the labour market and, in spite of more than thirty years of
equal pay legislation, remains remarkably resilient across all Member Sta
Determination of Forward
and Futures Prices
Lecture 10
Consumption vs Investment Assets
Investment assets are assets held by significant
numbers of people purely for investment purposes
(Examples: gold, silver)
Consumption assets are assets held primarily
The Greek Letters
Lecture 4b
Effect of Variables on Option Pricing
Variable
c
p
C
P
S0
K
T
r
D
+
?
+
+
+
?
+
+
+
+
+
+
+
+
+
+
Variables in the Black-Scholes Model
Five variables affect the options price
The stock price: S0
The exercise price: K
The r
FINANCIAL TIMES FRIDAY JULY 27 2012
13
COMMENT
It is time for Osborne to change tone on policy
Richard Lambert
G
eorge Osborne has a choice to
think about over his summer
holiday that will have serious
economic and political consequences.
Is he going to a
Tutorial 4
Question 1
Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and
a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a
5.95-year zero-coupon bond with a face value of $5,000. The current
1
DETECTING MANIPULATION IN FUTURES MARKETS:
THE FERRUZZI SOYBEAN EPISODE
Stephen Craig Pirrong
John M. Olin School of Business
Washington University
Abstract: Market manipulation-the exercise of market power in a futures market-is a
felony under US commo
Module:FMAP
ECON4012
Lecture 1
1.1
The Nature of Derivatives
A derivative is an instrument whose value
depends on the values of other more
basic underlying variables
1.2
Examples of Derivatives
Futures Contracts
Forward Contracts
Swaps
Options
1.3
Way
SHACKLING SHORT SELLERS: THE 2008 SHORTING BAN
Ekkehart Boehmer
ekkehart@uoregon.edu
Lundquist College of Business, University of Oregon
Charles M. Jones
cj88@columbia.edu
Columbia Business School
Xiaoyan Zhang
xz69@cornell.edu
Johnson Graduate School of
Futures and Hedging Interest
Rate Risk
Lecture 9
Day Count Conventions
in the U.S.
Treasury Bonds: Actual/Actual (in period)
Corporate Bonds: 30/360
Money Market Instruments: Actual/360
Interest earned between two dates is: (Number of
days between dates/N
Hedging Strategies Using
Futures
Lecture 8
Long & Short Hedges
A long futures hedge is appropriate when you know
you will purchase an asset in the future and want to
lock in the price
A short futures hedge is appropriate when you know
you will sell an ass
Tutorial 1
Question 1
Suppose that you enter into a short futures contract to sell July silver for $10.20
per ounce on the New York Commodity Exchange. The size of the contract is
5,000 ounces. The initial margin is $ 4,000, and the maintenance margin is
Option Pricing Model: The Binomial Model
Lecture 3
One-period binomial model
Discrete time (t=0, t=1)
Frictionless competitive markets
No taxes, transactions costs or margins
Investors can use full proceeds of short sales
Constant risk-free rate
The
Mechanics of Options
Markets-Properties of
Stock Options
Lecture 2
Types of Options
A call is an option to buy
A put is an option to sell
A European option can be exercised only
at the end of its life
An American option can be exercised at
any time
Option
Module:FMAP
ECON4012
Lecture 1
1.1
The Nature of Derivatives
A derivative is an instrument whose value
depends on the values of other more
basic underlying variables
1.2
Examples of Derivatives
Futures Contracts
Forward Contracts
Swaps
Options
1.3
Way
Tutorial 2
Question 1
Consider a stock with a price of $100 at time 0. One period later it can increase
by 25% or decrease by 20%. Assume a call option with an exercise price of
1 r d
$100. The risk-free rate is 7%. (Hint: p
)
ud
a) Calculate the value o
Mechanics of Futures
and Forward Markets
Lecture 7
2.1
Futures Contracts
Definition: Agreement to buy or sell an
asset for a certain price at a certain time in
the future
Specifications need to be defined:
What can be delivered
Where it can be delivered,
Interest Rates
Lecture 5
Types of Rates
Treasury rates
LIBOR rates
Repo rates
Types of Rates
Treasury rates are the rates implied by government
bonds.
No default risk therefore they might be used a risk free
rates
In practice however traders prefer the Lo
Swap Pricing and Currency
Swaps
Lecture 6
Nature of Swaps
A swap is an agreement to exchange cash flows
in the future according to a pre-arranged formula
specifying:
Start date
Notional principal
Lifetime
Examples of swaps
Cash receipts in US Dollars for
Hedging Strategies Using
Futures
Lecture 8
Long & Short Hedges
A long futures hedge is appropriate when you know
you will purchase an asset in the future and want to
lock in the price
A short futures hedge is appropriate when you know
you will sell an ass
The Greek Letters
Lecture 4b
Effect of Variables on Option Pricing
Variable
c
p
C
P
S0
K
T
r
D
+
?
+
+
+
?
+
+
+
+
+
+
+
+
+
+
Variables in the Black-Scholes Model
Five variables affect the options price
The stock price: S0
The exercise price: K
The r
Option Pricing Models: The Multiperiod Binomial
and Black-Scholes Models
Lecture 5
A three-period binomial tree
p
uu
1-p
p
u
Cu2d
1-p
du
p
p
1-p
p
1-p
ud
d
Cu 3
Cud 2
Cu 2d
1-p
p
Cud 2
1-p
dd
p
1-p
Cd 3
1
This tree gives the pathways and probabilities and
Determination of Forward
and Futures Prices
Lecture 7
Consumption vs Investment Assets
Investment assets are assets held by significant
numbers of people purely for investment purposes
(Examples: gold, silver)
Consumption assets are assets held primarily
Mechanics of Options
Markets-Properties of
Stock Options
Lecture 2
Types of Options
A call is an option to buy
A put is an option to sell
A European option can be exercised only
at the end of its life
An American option can be exercised at
any time
Option
Futures and Hedging Interest
Rate Risk
Lecture 9
Day Count Conventions
in the U.S.
Treasury Bonds: Actual/Actual (in period)
Corporate Bonds: 30/360
Money Market Instruments: Actual/360
Interest earned between two dates is: (Number of
days between dates/N
Option Pricing Model: The Binomial Model
Lecture 4
One-period binomial model
Discrete time (t=0, t=1)
Frictionless competitive markets
No taxes, transactions costs or margins
Investors can use full proceeds of short sales
Constant risk-free rate
The