Chapter 8 Derivatives: Risk Management with Speculation, Hedging, and Risk Transfer YANG Yu School of Economics and Management Ningbo University of Technology

Course Framework Chapters 1 – 3： Set out the foundation of exchange rates. 外汇汇率基础知识. Chapters 4 – 7： Explore the various assets available for international investing. 全球投资中与国际资产相关的内容. Chapters 8 -9: Develop the techniques and perspective of global investment and portfolio management. 国际投资组合管理方法与相关问题.

Chapter 8: Forward and Futures: 远期和期货 Swaps: 掉期 Options: 期权

Outline: In this chapter on derivatives we cover: Forward and futures contracts valuation. Swaps valuation Option valuation Describe various hedging strategies. The various uses of options in speculation, insurance of a portfolio, and the construction of structured notes.

Introduction of Derivatives Derivatives are instruments based on some underlying asset 基础/标的资产（合约中约定买卖的资产）. 标准化standardized合约：Derivatives can be traded on an organized exchange, which is usually the case for futures and options. 非标准化合约private：Derivatives can also be traded as private contracts, as is the case of forwards and swaps. 金融衍生工具是在货币、债券、股票等传统金融工具的基础上衍化和派生的，是以高杠杆性和零和博弈为特征的金融工具。

根据原生资产对金融衍生产品的分类 对象 原生资产 金融衍生产品 利率 短期存款 利率期货、利率远期、利率期权、利率掉期合约等 长期债券 债券期货、债券期权合约等 股票 股票期货、股票期权合约等 股票指数 股票指数期货、股票指数期权合约等 货币 各类现汇 货币远期、货币期、货币期权、货币掉期合约等 商品 各类实物商品 商品远期、商品期货，商品期权、商品掉期合约等

Forward and Futures: 远期和期货

Forward Contract 远期合约 A forward contract is a private agreement between two parties made ‘over the counter’ 场外交易. A forward contract can be customized in terms of size and delivery date交割日期. A forward contract cannot be resold 转售. Forward contracts cannot be ‘marked to market’ 盯市制度. The investor has to wait for the delivery date to realize the profit or loss on the position. Margins 保证金 deposited as guarantee, if any, are set once, on the day of the initial transaction.

Futures Contract 期货合约 Futures contracts are traded on an organized futures exchange. Futures contracts are standardized标准化的 in terms of size and maturity. There is usually no money exchanged when the contract is signed, but a margin is deposited as guarantee. Margins are set by the exchange, subject to periodic周期性 的 revision修改. The margin is determined by looking at the risk of a given contract.

Financial Futures Contracts 期货的种类 商品期货合约 Commodity Futures Contracts 农产品期货 Agricultural Futures 金属期货 Metal Futures 能源期货 Energy Futures 金融期货合约 Financial Futures Contracts 外汇期货 Currency Futures 利率期货 Interest Rate Futures 股指期货 Stock Index Futures

北京时间12月1日凌晨1点，IMF(国际货币基金组织)正式宣布，人民币2016年10月1日加入SDR(特别提款权)。

The Principals of Both Contracts Forward and futures contracts are made in advance of delivery. Forward and futures contracts imply a firm commitment to buy or sell at a future delivery date (maturity or expiration of the contract) at a set price. The price is set so that the buyer and the seller enter the contract without exchanging any payment at time of contracting. But a margin deposit could be required as guarantee.

Exhibit 10.1: Major Differences between Forward and Futures Contracts

Futures Contract — Types Currencies 外汇 Investors may transact major currencies in small amounts for reasonable transaction costs. Moreover, the market is very liquid.

Financial Futures Contracts 期货的种类 商品期货合约 Commodity Futures Contracts 农产品期货 Agricultural Futures 金属期货 Metal Futures 能源期货 Energy Futures 金融期货合约 Financial Futures Contracts 外汇期货 Currency Futures 利率期货 Interest Rate Futures 股指期货 Stock Index Futures

Exhibit 10.2: Quotations for Currency Futures, February 18

Currency Futures - Question Examine Exhibit 10.2 for March Sterling 英国货币Futures contracts. At what price did the March contract open? At what price did the March contract close? If someone had bought one March sterling contract at the close of February 17 at $1.6340 per £, would the person make a gain or loss?

Currency Futures – Answers $1.6350 per £ $1.6320 per £ A loss = £62,500 x -$0.002/£ = - $125.00

Futures Contract — Types Commodities 商品 A large variety of commodities are traded throughout the world: perishable goods (e.g. soybeans, live cattle), metals (e.g. copper, gold), energy (e.g. oil). For each commodity, the quality and quantity of the product traded are specified, as well as location and terms of delivery.

Financial Futures Contracts 期货的种类 商品期货合约 Commodity Futures Contracts 农产品期货 Agricultural Futures 金属期货 Metal Futures 能源期货 Energy Futures 金融期货合约 Financial Futures Contracts 外汇期货 Currency Futures 利率期货 Interest Rate Futures 股指期货 Stock Index Futures

Futures Contract — Types Interest rate futures:利率期货 e.g., Eurodollar and Treasury bond contracts. Commercial banks and money managers use these futures to hedge their interest rate exposure, to protect their portfolio of loans, investments or borrowing against adverse movements in interest rates.

Futures Contract — Types Stock Index futures:股票指数期货 Futures are traded on stock indexes and on single stocks. Gain (loss) on a stock index future = future price variation x Contract value multiple.

Stock Index Futures - Question The August futures contract of the Australian ASX index quotes at 3,500. The multiple is 50 Australian dollars (A$). The next day, this contract quotes at 3,700. What is the gain or loss for an investor long in one contract? Gain = (3,700 – 3,500) * A$ 50 = A$ 10,000

Swaps: 掉期

Swaps Swaps can be regarded as a long-term package of periodic forward contracts周期性远期合约. Swaps are used extensively by banks to manage risk exposure on their assets and liabilities. A swap is a contract whereby the two parties agree to a periodic exchange of cash flows. On each swap payment date, the two cash flows are netted and a payment is made by the party owing money. Each side of the swap is called a ‘leg’.

Characteristics： Swaps appear off-balance sheet 资产负债表. The swap market is an OTC market in which the major commercial and investment banks participate. There is no organized secondary swap market. This is problematic because swaps are long-term contracts.

An investor wishing to get out of a swap has three alternatives: 解除掉期合约 Agree on a voluntary 自愿的 termination 终止 with the original counterparty. Write a mirror swap 镜像掉期with the original counterparty合约方. Write a reverse swap in the market with another counterparty.

Swaps — Types Currency: 外汇掉期 Interest Rate Swaps: 利率掉期 A contract to exchange streams of fixed cash flows denominated in two different currencies. Interest Rate Swaps: 利率掉期 A contract to exchange streams of cash flows in the same currency but based on two different interest rates (e.g. floating versus fixed). U.S. Dollar Swaps，LIBOR Currency Interest Rate Swaps: 外汇—利率掉期 A contract to exchange streams of cash flows in two different currencies, one with a fixed interest rate and the other with a floating interest rate.

Options: 期权

A call看涨期权 (re: put看跌期权) option gives the buyer of the option contract the right, but not the obligation, to buy (re: sell) a specified number of units of an underlying asset at a specified price, the strike price, at or before a specified date, the expiration date 到期日. In all cases, the seller /writer, of an option is subject to the buyer’s decision to exercise执行 or not the option. A European option can only be exercised on the expiration date. An American option can be exercised any time up until the expiration date. In order to obtain the option, the buyer must pay a price, the option premium期权费, that is received by the seller.

Call Options: 行使权利 售出权利 12月1日，标的物是铜期货，它的期权执行价格为1850美元/吨。A买入这个权利，付出5美元；B卖出这个权利，收入5美元。次年1月1日，铜期货价上涨至1905美元/吨，看涨期权的价格涨至55美元。A可采取两个策略： A有权按1850美元/吨的价格从B手中买入铜期货；B在A提出这个行使期权的要求后，必须予以满足，即便B手中没有铜，也只能以1905美元/吨的市价在期货市场上买入而以1850美元/吨的执行价卖给A，而A可以1905美元/吨的市价在期货市场上抛出，获利50美元/吨（1905一1850一5）。B则损失50美元/吨（1850一1905+5）。 A可以55美元的价格售出看涨期权、A获利50 美元/吨（55一5）。 行使权利 售出权利

Put Options: 12月1日，标的物是铜期货，它的期权执行价格为1750美元/吨。A买入这个权利，付出5美元；B卖出这个权利，收入5美元。次年1月1日，铜期货价下跌至1695美元/吨，看涨期权的价格涨至55美元。A可采取两个策略： A有权按1695美元/吨的价格从市场中买入铜；而以1750美元/吨的价格卖给B，B必须接受，而A可以获利50美元/吨（1750一1695一5）。B则损失50美元/吨。 A可以55美元的价格售出看跌期权、A获利50 美元/吨（55一5）。 行使权利 售出权利

Options — Types Currency Options: 外汇期权 Stock Options： 股票期权 Interest Rate Options： 利率期权

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