financial management lecture - futures and options markets

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1、FinancialManagementLecture8-FuturesandOptionsMarketsFinancialManagementLecture8-FuturesandOptionsMarketsDr.TarikDriouchitarik.driouchi@kcl.ac.ukOfficehours[WBW4.08]:Weds4-6pm;emailappointmentModuleOutlineLecture1.ContextofFinancialManagementLecture2.BondandSt

2、ockValuation*Lecture3.InvestmentApprapisalLecture4.OnRiskandReturnspLecture5.CostofCapitaplLecture6.CapitalStructurepLecture7.DividendPolicyLecture8.FinancialHedgingandInstrumentse,pLecture9.InternationalPerspectivesofFinMgt.Lecture10.BehaviouralDecision-maki

3、nginFinanceeLecture11.Wrap-upandTransitiontoAdv.FinMgt.2LearningObjectivesUnderstandfuturesandoptionscontractsBeabletocomputeprofitsandlossesonfuturespositionsEmployfuturescontractsforhedgingpurposesUnderstandthecharacteristicsofcallandputoptionsImplementcove

4、redcallandprotectiveputstrategies3Hedgersvs.Speculators?Differencesamong:Hedging:lockingreturnstoaconstantlevelInsurance:protectionagainanegativeoutcomeSpeculation:bettingonspecificmarketdirectionsArbitrage:takingadvantageofmispricingopportunities4Futuresmark

5、etsChicagoBoardofTrade(CBOT)ThefirstandlargestcommoditiesexchangeInUKLIFFEForwardcontract-agreementbetweentwopartiestobuyorsellacommodityataspecificfuturetimeforanagreeduponprice.Popularamongproducers,processors,andmerchantsCounterpartyrisk(producersunableoru

6、nwillingtodeliverorbuyersvanish)Futurescontract:standardizedagreementbetweentwopartiescommittingonetobuyandtheothertosellatasetpriceonorbeforeaspecifieddateinthefutureMargin:good-faithdepositstoinsurecontractperformance;InitialMargin:Minimumamountrequiredtoin

7、itiateatrade;Maintenancemargin:Minimumamountrequiredatalltimestosustainamarketposition;Margincall:whenmarginlevelislowerthanmaintenancemargin5Mark-to-marketDailysettlementofgainsandlossesbetweenbuyersandsellers.Ifspotpricerises,sellerspaybuyersincashforthecha

8、ngeinpriceIfspotpricesfalls,buyersowesellersIfafuturestraderlosestoomuch,moremoneywillbeneededforthemarginaccount.6FuturesContractSpecifications-Example7Payoffforfuturespositions(longvs.s