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1、Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.1,Financial Engineering金融工程学,Textbook：John C.Hull,Options,Futures and Other Derivative Securities,Prentice Hall,4th Ed.(清华大学出版社,)New Edition:5th,第三版中译本：张陶伟，华夏出版社，2000 Hulls homepage:htpp:/www.rotman.utoronto.ca/h
2、ull to download slides and software My homepage:http:/,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.2,References,John C.Hull,Fundamentals of Futures and Options Markets,Prentice Hall,4th Ed.,2002.(清华大学出版社)Robert W.Kolb,Futures,Options and Swaps,Blackwell Pu
3、blishing,4th Ed.,2002.Lawrence Galitz,Financial Engineering:Tools and Techniques to Manage Financial Risks,Pitman Publishing,1995.(中译本：唐旭，经济科学出版社，1998）John F.Mrshall,Vipul K.Bansal,Financial Engineering,Simon&Schuster,1992.(中译本：宋逢明，朱宝宪，清华大学出版社，1998）李森，期权理论与案例分析：一个战略性的投资，复旦大 学出版社，2002年8月.张志强，期权理论与公司理
4、财，华夏出版社，1999.,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.3,IntroductionChapter 1,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.4,The Nature of Derivatives,A derivative（衍生产品/工具）is an instrument whose value depends
5、on the values of other more basic underlying（标的/原生）variables,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.5,Examples of Derivatives,Forward Contracts(远期合约)Futures Contracts(期货合约)Swaps(互换)Options（期权）,Options,Futures,and Other Derivatives,4th edition 2000 by
6、John C.HullTang Yincai,2005,1.6,Derivatives Markets,Exchange(交易所)tradedTraditionally exchanges have used the open-outcry system,but increasingly they are switching to electronic tradingContracts are standard and there is virtually no credit riskOver-the-counter(OTC，场外市场)A computer-and telephone-link
7、ed network of dealers at financial institutions,corporations,and fund managersContracts can be non-standard and there is some small amount of credit risk,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.7,Ways Derivatives are Used,To hedge(规避)risksTo speculate(
8、投机)(take a view on the future direction of the market)To lock in(锁定)an arbitrage(套利)profitTo change the nature of a liability(负债)To change the nature of an investment without incurring the costs of selling one portfolio(投资组合)and buying another,Options,Futures,and Other Derivatives,4th edition 2000 b
9、y John C.HullTang Yincai,2005,1.8,Forward Contracts(远期合约),A forward contract is an agreement(协议)to buy or sell an asset at a certain time in the future for a certain price(the delivery price，交割价格)It can be contrasted with a spot contract(现货合约)which is an agreement to buy or sell immediatelyIt is tra
10、ded in the OTC market,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.9,Foreign Exchange Quotes for GBP on Aug 16,2001(See page 3),Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.10,Terminologies,The party that has agree
11、d to buy has what is termed a long position(多头)The party that has agreed to sell has what is termed a short position(空头),Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.11,Example(page 3),On August 16,2001 the treasurer of a corporation enters into(签署)a long f
12、orward contract(多头远期合约)to buy 1 million in six months at an exchange rate of 1.4359This obligates the corporation to pay$1,435,900 for 1 million on February 16,2002What are the possible outcomes?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.12,Payoff(损益)fro
13、m aLong Forward Position,K,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.13,Payoff from a Short Forward Position,K,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.14,Futures Contracts(期货合约),Agreement to buy or sell an
14、asset for a certain price at a certain timeSimilar to forward contractWhereas a forward contract is traded OTC,a futures contract is traded on an exchange,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.15,1.Gold:An Arbitrage Opportunity?,Suppose that:The spot
15、 price of gold is US$300The 1-year forward price of gold is US$340The 1-year US$interest rate is 5%per annumIs there an arbitrage opportunity?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.16,2.Gold:Another Arbitrage Opportunity?,Suppose that:The spot price
16、of gold is US$300The 1-year forward price of gold is US$300The 1-year US$interest rate is 5%per annumIs there an arbitrage opportunity?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.17,The Forward Price of Gold,If the spot price of gold is S and the forward
17、price for a contract deliverable in T years is F,then F=S(1+r)Twhere r is the 1-year(domestic currency)risk-free rate of interest.In our examples,S=300,T=1,and r=0.05 so thatF=300(1+0.05)=315,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.18,1.Oil:An Arbitrag
18、e Opportunity?,Suppose that:The spot price of oil is US$19The quoted 1-year futures price of oil is US$25The 1-year US$interest rate is 5%per annumThe storage costs of oil are 2%per annumIs there an arbitrage opportunity?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yinc
19、ai,2005,1.19,2.Oil:Another Arbitrage Opportunity?,Suppose that:The spot price of oil is US$19The quoted 1-year futures price of oil is US$16The 1-year US$interest rate is 5%per annumThe storage costs of oil are 2%per annumIs there an arbitrage opportunity?,Options,Futures,and Other Derivatives,4th e
20、dition 2000 by John C.HullTang Yincai,2005,1.20,Examples of Futures Contracts,Agreement to:buy 100 oz.of gold US$300/oz.in December(COMEX)sell 62,500 1.5000 US$/in March(CME)sell 1,000 bbl.of oil US$20/bbl.in April(NYMEX),Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yinc
21、ai,2005,1.21,Options,A call option(看涨期权)is an option to buy a certain asset by a certain date for a certain price(the strike price，执行价格/敲定价格),A put option(看跌期权)is an option to sell a certain asset by a certain date for a certain price(the strike price),Options,Futures,and Other Derivatives,4th editi
22、on 2000 by John C.HullTang Yincai,2005,1.22,An American options can be exercised at any time during its lifeA European option can be exercised only at maturity,American vs European Options,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.23,Examples:Cisco Optio
23、ns(May 8,2000;Stock Price=62.75),Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.24,Long Call on Microsoft(Figure 1.2,Page 7),Profit from buying a European(欧式)call option on Microsoft:option price=$5,strike price=$60,Options,Futures,and Other Derivatives,4th e
24、dition 2000 by John C.HullTang Yincai,2005,1.25,Short Call on Microsoft(Figure 1.4,page 9),Profit from writing a European call option on Microsoft:option price=$5,strike price=$60,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.26,Long Put on IBM(Figure 1.3,pa
25、ge 8),Profit from buying a European put option on IBM:option price=$7,strike price=$90,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.27,Short Put on IBM(Figure 1.5,page 9),Profit from writing a European put option on IBM:option price=$7,strike price=$90,Opti
26、ons,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.28,Payoffs(损益)from OptionsWhat is the Option Position in Each Case?,K=Strike price,ST=Price of asset at maturity,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.29,Options vs.F
27、utures/Forwards,A futures/forward contract gives the holder the obligation to buy or sell at a certain priceAn option gives the holder the right to buy or sell at a certain price,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.30,Types of Traders,Hedgers(套期保值者
28、)Speculators(投机者)Arbitrageurs(套利者),Some of the large trading losses in derivatives occurred because individuals who had a mandate(授权)to hedge risks switched to being speculators,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.31,Hedging Examples,A US company w
29、ill pay 10 million for imports from Britain in 3 months and decides to hedge using a long position in a forward contract(The 3-month forward exchange rate is 1.6056).What are the alternative strategies?An investor owns 1,000 Microsoft shares currently worth$73 per share.A two-month put with a strike
30、 price of$65 costs$2.50.The investor decides to hedge by buying 10 contracts,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.32,Differences in the two hedge alternatives,Forward contracts are designed to neutralize risk by fixing the price that the hedger will
31、 pay or receive for the underlying asset.There is no assurance that the outcome with hedging is better than the outcome without hedging.The hedge using forward contract requires no initial payment,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.33,Option contr
32、acts provide assurance.They offer a way for investors to protect themselves against adverse price movements in the future while still allowing them to benefit from favorable price movements.Option involve the payment of an up-front fee.,Options,Futures,and Other Derivatives,4th edition 2000 by John
33、C.HullTang Yincai,2005,1.34,Speculation Example 1,An investor feels that sterling will strengthen relative to the U.S.dollar over the next two months.The current rate is 1.6470$/and the 2-month futures price is 1.6410$/.What are the alternative strategies?,Options,Futures,and Other Derivatives,4th e
34、dition 2000 by John C.HullTang Yincai,2005,1.35,Two strategies:,Buy 250,000 for$411,750,deposit the sterling in an interest-earning account for two months.Take a long position in 4 two-month futures contracts on sterling(each for 62,500).,Options,Futures,and Other Derivatives,4th edition 2000 by Joh
35、n C.HullTang Yincai,2005,1.36,Possible outcomes,Exchange rate is 1.7000 in two months.The investor makes$(1.7000-1.6470)x250,000=$13,250 using the first strategy and$(1.7000-1.6410)x250000=$14,750 using the second strategy.Exchange rate is 1.6000 in two month.The investor has a loss of$(1.6470-1.600
36、0)x25000=$11,750 using the first strategy and$(1.6410-1.6000)x25000=$10,250 using the second strategy.,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.37,Speculation Example 2,An investor with$4,000 to invest feels that the price of A will increase over the ne
37、xt 2 months.The current stock price is$40 and the price of a 2-month call option with a strike of 45 is$2What are the alternative strategies?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.38,Two strategies:,Buy 100 shares of A.Buy 2,000 2-month call options(
38、i.e.20 contracts)on A with a$45 strike price.The cost of each alternative is$4,000.,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.39,Possible outcomes,A rises to$70 two months later.The Investor makes a profit of$100 x(70-40)=$3,000 using the first strategy
39、and$2,000 x(70-45)-$2,000 x2=$46,000 using the second.A falls to$30 two months later.The investor losses$100 x(40-30)=$1,000 with the first strategy and$4,000 with the second strategy.,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.40,A Comparison,Both future
40、s and options contracts provide a way in which a type of leverage can be obtained(compared with the spot market).Good outcomes becomes very good,while bad outcomes become very bad.In example1:the first alternative requires an up-front investment of$411,750 while the second alternative only requires
41、a small amount say,$25,000(deposited in a margin account).In example 2:the profit(loss)from the second strategy is over 15(4)times as much as the first.,Leverage:with a relativelu small initial money,the investor is able to take a large speculative position.,Options,Futures,and Other Derivatives,4th
42、 edition 2000 by John C.HullTang Yincai,2005,1.41,In the futures setting,the speculators potential loss as well as the potential gain is very largeIn the options setting,no matter how bad things get,the speculators loss is limited to the cost of the options(premium),Options,Futures,and Other Derivat
43、ives,4th edition 2000 by John C.HullTang Yincai,2005,1.42,Arbitrage Example(pages 14),A stock price is quoted as 100 in London and$172 in New YorkThe current exchange rate is 1.7500What is the arbitrage opportunity?,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,200
44、5,1.43,No Arbitrage Assumption,The forces of supply and demand=Arbitrage opportunities cannot last long=Assumption:there are no arbitrage opportunities,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.44,Summary(page 15),Manual,see pages 471-474 of the book:John C.Hull,Fundamentals of Futures and Options Markets,Prentice Hall,4th Ed.,2002.(清华大学出版社),Software:DerivaGem,Options,Futures,and Other Derivatives,4th edition 2000 by John C.HullTang Yincai,2005,1.45,Assignments(page 16-18,4th edition),1.5,1.9,1.17,1.20,1.21,
