INVESTMENTS 投资学 （博迪BODIE, KANE, MARCUS）Chap023 Futures, Swaps, and Risk Management.ppt

CHAPTER 23 Futures, Swaps, and Risk Management Figure 23.7 Interest Rate Futures Swaps are essentially a series of forward contracts. We need to find the level annuity, F *, with the same present value as the stream of annual cash flows that would be incurred in a sequence of forward rate agreements. Pricing on Swap Contracts Figure 23.8 Forward Contracts versus Swaps Credit Default Swaps Payment on a CDS is tied to the financial status of one or more reference firms. Allows two counterparties to take positions on the credit risk of those firms. Indexes of CDS have now been introduced. Commodity Futures Pricing General principles that apply to stocks apply to commodities. However… Carrying costs are more for commodities. Spoilage is a concern. Commodity Futures Pricing Let F0 = futures price, P0 = cash price of the asset , and C = Carrying cost Futures Pricing F0 = P0(1+rf+c) is a parity relationship for commodities that are stored. The formula works great for an asset like gold, but not for electricity or agricultural goods which are impractical to stockpile. Figure 23.9 Typical Agricultural Price Pattern over the Season Example 2.8 Commodity Futures Pricing The T-bill rate is 5%, the market risk premium is 8%, and the beta for orange juice is 0.117. Orange juice discount rate is 5% + .117(8%) = 5.94%. Let the expected spot price in 6 months be $1.45. $1.45/(1.0594)0.5 = $1.409 = PV juice F0/(1.05)0.5 = 0.976F0 = PV futures 0.976F0 = $1.409 F0 =$1.444 INVESTMENTS | BODIE, KANE, MARCUS INVESTMENTS | BODIE, KANE, MARCUS Copyright ? 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Futures can be used to hedge specific sources of risk. Hedging instruments include: Foreign exchange futures Stock index futures Interest rate futures Swaps Commodity futures Futures Foreign Exchange Futures Foreign exchange risk: You may get more or less home currency than you expected from a foreign currency denominated transaction. Fo