Hedging Strategies Using
Futures
Chapter 3
Fundamentals of Futures and Options Markets, 8th Ed, Ch3, Copyright John C. Hull 2013
1
Outline
Hedges
Basis
risk
Optimal hedge ratio
Hedge using index futures
Stack and roll
Fundamentals of Futures and Opti
Tutorial 5
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson
new International Edition. Ed 8. ISBN number: 9781292041902
Note: Questions with * must be covered in tutorial class
Problem 7.9.*
Companies X and Y have been of
Sample Questions
Question 1
(a) The oneyear zero rate equals 5% and the twoyear zero rate equals
5.5%. What is the forward rate for the second year? All rates are
continuously compounded.
(b) The yield curve is flat at 4% per annum. What is the value of
Mid Semester Test Format
Introduction to Derivative Securities INVE3000
Semester 1, 2017



Test is worth 25% of the overall assessment
Test covers all materials from week 1 week 5
Permitted materials:
o A scientific/financial but not programmable cal
Assignment 1 (assessment worth 10%)
Due Date Monday 8th May at 4pm
[Submission will be strictly observed. Make submission as per unit outlie suggests]
Question 1
An Australian investor holds a one month short forward position on USD. The contract calls fo
Interest Rates
Chapter 4
Fundamentals of Futures and Options Markets, 8th Ed, Ch 4, Copyright John C. Hull 2013
1
Types of Rates
Treasury
rates
LIBOR rates
Repo rates
Fundamentals of Futures and Options Markets, 8th Ed, Ch 4, Copyright John C. Hull 201
Interest Rate Futures
Chapter 6
Fundamentals of Futures and Options Markets, 8th Ed, Ch 6, Copyright John C. Hull 2013
1
Day Count Convention
Defines:
the period of time to which the interest rate applies
The period of time used to calculate accrued int
Swaps
Chapter 7
Options, Futures, and Other Derivatives, 8th Ed, Ch 7, Copyright John C. Hull 2013
1
Nature of Swaps
A swap is where two parties agree to
exchange cash flows at specified
future times according to certain
specified rules
Options, Futures,
Introduction
Chapter 1
Fundamentals of Futures and Options Markets, 8th Ed, Ch 1, Copyright John C. Hull 2013
1
Outline
Derivatives
Futures / forwards
Put and call options
Hedging and speculation
Arbitrage
Fundamentals of Futures and Options Markets,
Hedging Strategies Using
Futures
Chapter 3
Fundamentals of Futures and Options Markets, 8th Ed, Ch3, Copyright John C. Hull 2013
1
Outline
Hedges
Basis
risk
Optimal hedge ratio
Hedge using index futures
Stack and roll
Fundamentals of Futures and Opti
Mechanics of Futures
Markets
Chapter 2
Fundamentals of Futures and Options Markets, 8th Ed, Ch 2, Copyright John C. Hull 2013
1
Outline
Margin
on futures
Collateralization
Clearinghouse
Delivery and Price Patterns
Profit from Futures/Forwards
Forwar
Tutorial 1
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson
new International Edition. Ed 8. ISBN number: 9781292041902
Note: Questions with * must be covered in tutorial class
Extra Questions
1. Derivatives may be used f
Tutorial 4
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson
new International Edition. Ed 8. ISBN number: 9781292041902
Note: Questions with * must be covered in tutorial class
Problem 3.8.
In the Chicago Board of Trades
Tutorial 3
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson New
International Edition. Ed 8. ISBN number: 9781292041902
Problem 5.9.*
A oneyear long forward contract on a nondividendpaying stock is entered into when th
Tutorial 2
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson
new International Edition. Ed 8. ISBN number: 9781292041902
Note: Questions with * must be covered in tutorial class
Problem 4.11.*
Suppose that 6month, 12mont
Assignment 2
Due date 21 October 4pm
Bentley Student  You need to submit assignment via 'turnitin' and 'hardcopy' submission at Level 5
Building 402 at the administration.
Question 1
(a) The price of a European call option on a stock with a strike price