Mechanics of Futures
Markets
Chapter 2
Sherry Chan
1
Futures Contracts
z
z
z
Available on a wide range of underlyings
Exchange traded
Specifications need to be defined:
z
z
z
z
What can be delivered,
Where it can be delivered, &
When it can be delivered
S

Yuan Ze University
FN413 Derivative Securities
Mid-term Mock Examination
April/2016
10:10-12:00
TOTAL: 110 POINTS
WEDNESDAY EXAMS
Answer All Questions
Put your name/student number on every page or answer book.
Time: 2 Hour
1.True or False (40 points, 5 po

Derivatives ( )
Lecture 1
Introduction to Options
1
Options (1 of 2)
An
option is a contract b/w two parties, a
buyer and a seller, that gives the buyer
the right, but not the obligation, to
purchase or sell something at a later
date at a price agreed up

Options Strategy and Trading
Ch11
Sherry Chan
1
Option Basics
Call Holders Decision Rule : max[0, ST - E]
ST = Share market price on the exercise day.
E= the Strike price according to the options contract.
Long Call
40
Profit\Loss
30
20
10
0
450
500
550
6

Valuing Stock Options:
The Black-Scholes-Merton
Model
Chapter 13
1
Pricing Options Price
Amongst the various options models, the Black
and Scholes model, won Nobel prize in year
1997. It is the most common use model which is
recommended by most option exc

Interest Rate Futures
Chapter 6
Sherry Chan
1
Day Count Conventions
in the U.S. (Page 131-132)
Treasury Bonds: Actual/Actual (in period)
Corporate Bonds: 30/360
Moneyy Market Instruments: Actual/360
2
Treasury Bond Price Quotes
in the U.S
Cash p
price = Q

Introduction to
Binomial Pricing Model
Introduction to the Binominal model
The Black and Scholes model is considered to
be complicated in practice, Cox, Ross and Rub
instein therefore introduced the Binominal m
odel in 1979, which took in account of the p

Determination of Forward
and Futures Prices
Chapter 5
Sherry Chan
1
Consumption vs Investment Assets
z
z
Investment assets are assets held by
significant numbers of people purely for
investment purposes (Examples: gold,
silver)
Consumption
p
assets are as

Interest Rates
Chapter 4
Sherry Chan
1
Types of Rates
z
z
z
Treasury rates
LIBOR rates
Repo rates
2
Measuring Interest Rates
z
z
The compounding frequency used
for an interest rate is the unit of
measurement
The difference
ff
between quarterly
p
g is
and

Introduction
Chapter 1
Sherry Chan
1
The Nature of Derivatives
A derivative is an instrument whose value
depends on the values of other more
b i underlying
basic
d l i variables
i bl
2
What are Derivatives?
z
Derivatives are financial instruments
whose re

Hedging
g g Strategies
g Usingg
Futures
Chapter 3
Sherry Chan
1
Long & Short Hedges
z
z
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
f
hedge is appropriate
you kno

Physics Writing Guide
How to write a Physics Journal Article
Dr. James G. McLean
Dept. of Physics & Astronomy
State University of New York at Geneseo
December, 2001 (with various later updates)
Introduction
This is a guide to the format, structure, and st