Group Presentation
Imagine you are a sales team at an investment bank
trying to market a particular structured finance product
to your institutional investor clients. You will be giving a
10-minute client presentation. You need to tailor your
sales pitch
QF301 Structured Finance
Week 2: Forwards & Futures Markets
1. What is the fair price for a 3m forward contract based on the following information:
Stock price = $75
Dividend in 1m = $0.50
Dividend in 4m = $0.51
Discrete interest rate = 3%
2. How coul
Derivatives Homework 2
1: Considering other factors are identical, the difference between two calls should be:
44 e5 1 -40 e5 1 =$3.8, but it comes out that the price difference is $5.00. So
there is an arbitrage opportunity.
The strategy to get arbitrage
Derivatives Homework1
Q1: The spot price in one-year is $95, and the delivery price K is $100.
(a) The gain for trader in short position is 100-95=$5
Diagram for the trader in short position is:
(b) The loss for counterparty is -100+95=-$5
Diagram for the
Lecture 2 Interest Rates,
Forwards and Swaps
FNCE6008Derivativesanalysis
By Jianfeng Hu
Singapore Management
University
1
Agenda
Interest rates and forward contracts
Forward pricing
Swaps
2
I. Interest rates and forward contracts
3
Rates
Practitioners
Lecture 6 Special Topics on
Derivatives
FNCE6008Derivativesanalysis
By Jianfeng Hu
Singapore Management
University
1
Agenda
Value at risk (VaR)
Credit analysis
Credit derivatives
2
I. Value at Risk
3
The Question Being Asked in VaR
What loss level is s
Lecture 1 Introduction
FNCE6008Derivativesanalysis
By Jianfeng Hu
Singapore Management
University
1
Agenda
Course logistics
Ice breaking
Introduction to derivatives
Definition
Examples
Trading derivatives
Types of investors using derivatives
2
My avail
QF301 Structured Finance
Solutions, Week 6
1.
Question
Consider two bear put spreads
(K1 , K2 )
constructed using vanilla European put
options, where
S0
Bear Spread 1:
K1 < K2 = S0
Bear Spread 2:
S0 = K1 < K2
is the spot stock price. Compare the prices of
QF301 Structured Finance
Week 3: Swaps & Interest Rate Derivatives
Due Date: 30-Jan-2017
1. A simple interest rate contract whereby you are paid 4.5% ( is the day count fraction)
gives you the optionality to choose one of the following day count conventio
QF301 Structured Finance
Week 4: Vanilla Options
Due Date: 6-Feb-2017
1. Let C and P denote European call and put option prices, respectively. Determine the following
boundary cases:
(a) S 0, C ?
(b) S 0, P ?
(c) S , C ?
(d) S , P ?
2. Create the followin
1. (a) the trader will gain $5 from the forward on the maturity date, the diagram is shown
below as (1):
(b) the buyer will loss $5 from the forward on the maturity date, the diagram is shown
below as (2):
-5
5
Proft
Proft
95
95
100
100
Price of Underlyin
QF301 Structured Finance
Week 3: Swaps & Interest Rate Derivatives
1. Consider a one-year swap with quarterly payments on days 90, 180, 270 and 360. The day
count convention is 30/360. The spot LIBOR rates on trade initiation date are as follow
Tenor
3m
6
QF301 Structured Finance
Week 5: Greeks & Exotic Options
1. An option pays:
$0,
ST < $100
ST $100, $100 ST $120
$20,
ST > $120
Replication this option using vanilla European call options.
2. If a cash-or-nothing binary option pays
$1, K1 ST K2
$0,
otherwi
QF301 Structured Finance
Solutions, Week 5
1.
Question An option pays:
$0,
ST < $100
ST $100, $100 ST $120
$20,
ST > $120
Replicate this option using vanilla European call options.
Solution The payo diagram is
This can be replicated with 2 vanilla option
QF301 Structured Finance
Week 4: Vanilla Options
1. Consider the following portfolios of European call options on the same underlying stock with
the same maturity:
Portfolio
Assets
A
B
2 C(K = 100)
C(K = 90), C(K = 110)
The rst portfolio contains 2 call o
QF301 Structured Finance
Solutions, Week 3
1. Consider a one-year swap with quarterly payments on days 90, 180, 270 and 360. The day
count convention is 30/360. The spot LIBOR rates on trade initiation date are as follow
Tenor LIBOR
3m
6m
9m
12m
(a)
3.45%
QF301 Structured Finance
Week 2: Forwards & Futures Markets
Due Date: 23-Jan-2017
1. A person who is short a commodity future are also given the optionality to decide delivery (how,
where and when delivery is to be handled) and settlement method (either c
QF301 Structured Finance
Week 5: Greeks & Hedging
Due Date: 18-Feb-2017
1. Consider the following call options on the same underlying stock:
C1
C2
Maturity
1y
1y
Strike
K1
K2
0.473
0.557
0.022
0.02
You are long 10, 000 unit of C1 in your portfolio.
(a) By
Lecture 4 Options
FNCE6008Derivativesanalysis
By Jianfeng Hu
Singapore Management
University
1
Agenda
Mechanics of options markets
Properties of stock options
Options trading strategies
2
I. Mechanics of Options Markets
3
Specification of Exchange-Trad