Determination of Forward and Futures Prices
Chapter 5
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
5.1
Consumption vs Investment Assets
Investment
assets are assets held by significant numbers of people
Interest Rates
Chapter 4
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
4.1
Types of Rates
Treasury
rates LIBOR rates Repo rates
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John
Hedging Strategies Using Futures
Chapter 3
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
3.1
Long & Short Hedges
A
long futures hedge is appropriate when you know you will purchase an asset in the future a
Trading Strategies Involving Options
Chapter 10
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
10.1
Three Alternative Strategies
Take
a position in the option and the underlying Take a position in 2 or mo
Mechanics of Options Markets
Chapter 8
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
8.1
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 Greek Letters
Chapter 15
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
15.1
Example (Page 325)
A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividendpaying stock S = 49
Volatility Smiles
Chapter 17
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
17.1
Volatility Smile
A
volatility smile shows the variation of the implied volatility with the strike price The volatility smil
Binomial Trees in Practice
Chapter 16
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
16.1
Binomial Trees
Binomial trees are frequently used to approximate the movements in the price of a stock or other asset
Valuing Stock Options:The Black-Scholes Model
Chapter 12
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
12.1
The Black-Scholes Random Walk Assumption
Consider
a stock whose price is S In a short period of
Introduction to Binomial Trees
Chapter 11
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
11.1
A Simple Binomial Model
A
stock price is currently $20 In three months it will be either $22 or $18
Stock Price
Mechanics of Futures Markets
Chapter 2
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
2.1
Futures Contracts
Available
on a wide range of underlyings Exchange traded Specifications need to be defined:
Wha
Introduction
Chapter 1
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
1.1
The Nature of Derivatives
A derivative is an instrument whose value depends on the values of other more basic underlying variables
Derivatives Mishaps and What We Can Learn from Them
Chapter 23
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
23.1
Big Losses by Financial Institutions
Allied Irish Bank ($700 million) Amaranth (6 billion)
Weather, Energy, and Insurance Derivatives
Chapter 22
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
22.1
Weather Derivatives: Definitions
Heating
degree days (HDD): For each day this is max(0, 65 A) wher
Credit Derivatives
Chapter 21
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
21.1
Credit Derivatives
Derivatives
where the payoff depends on the credit quality of a company or sovereign entity The market
Exotic Options and Other Nonstandard Products
Chapter 20
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
20.1
Types of Exotic Options
Packages Nonstandard
American options Forward start options Compound
Interest Rate Futures
Chapter 6
Fundamentals of Futures and Options Markets, 6th Edition, Copyright John C. Hull 2007
6.1
Day Count Conventions in the U.S. (Page 127)
Treasury Bonds: Actual/Actual (in period) Corporate Bonds: 30/360 Money Market