Download presentation
Presentation is loading. Please wait.
Published byMabel Hunter Modified over 8 years ago
1
Capital Markets Courses 11&12
2
XI. Forward and futures Forward contract No standardized Binding contract The forward contract buyer: buy the support asset The forward contract seller: sell the support asset Purpose: to eliminate the uncertainty related to the price evolution Result: Long = Spot price at maturity – Contract price Short = Contract price - Spot price at maturity
3
XI. Forward and futures Futures contract Standardized Characteristics: - Contract size and support asset - Delivery date - Price - Daily settling up (marked to market) - Price fluctuation - Liquidation
5
XI. Forward and futures ForwardFutures Non standardized: direct negotiationStandardized: traded on the exchange Result determined at the maturityResult determined daily Liquidation: at the maturityLiquidation: at the maturity or until the maturity Margin: onceMargin: must be maintaned daily
6
XI. Basis Difference between the future price and the spot price = basis At the maturity: basis = 0 If the contract is liquidated before the maturity: basis risk A futures contract is sold today at 296; support asset price: 291 basis: 5 tomorrow: futures price: 298,5, support asset price: 294 basis: 4,5 Profit from asset holding: 3 Loss from futures contract: 2,5 Total result = 0,5 = basis difference
7
XI. Term price (spot – futures parity) 2 possibilities for holding an asset in the future: A) Present buying and holding it B) Term buying and making a deposit in order to obtain the amount needed at the contract maturity Result A = Result B = = An asset price is 291 today, interest rate is 10%/year, and 6M futures price is 305,2
8
XII. Options Contract which gives to its holder the right to purchase or to sell an asset for a specified price (strike or exercise price) and for a price paid (premium) Depending on the contract buyer interest regarding the support asset: - Call - Put Depending on the exercising moment: - European - American Depending on the trading market: - Standardized - No standardized
9
XII. Call Options Long callShort call Break even=X+premiumBreak even=X+premium S T <XS T <X Result=-premiumResult=+premium Payoff=0Payoff= 0 S T >XS T >X Result=-X+ S T - premium Result =X- S T +premium Payoff=-X+ S T Payoff =X- S T Result=Payoff-premiumResult=Payoff+premium X BE X STST STST
10
XII. Put Options Long putShort put Break Even=X-premiumBreak Even=X-premium S T <XS T <X Result=X-S T -premium Result =-X+ S T +premium Payoff=X- S T Payoff =-X+ S T S T >XS T >X Result=-premiumResult=+premium Payoff=0Payoff =0 Result=Payoff-premiumResult=Payoff+premium X BE X STST STST
11
XII. Options characteristics !Options elements: - Support asset type and quantity - Expiration date - Strike price (Exercise price) - Premium Depending the expectation regarding the market price evolution: option strategies
12
XII. Option Strategies. Straddle Trading of 2 options (one put and one call) with the same support asset, same strike price and expiration date. Strategy result = sum of results of the 2 options Long straddle: BEput = break even PUT = X – premiums sum BEcall = break even CALL = X + premiums sum If X > S T : PUT is exercised: the support asset is sold at the strike price, is bought at the market price and the sum of premiums is paid If X = S T : strategy is abandoned; the loss is maximum = sum of the paid premiums If X < S T : CALL is exercised: the support asset is bought at the strike price, is sold at the market price and the sum of premiums is paid X BE call BE put
13
XII. Option Strategies. Straddle Short straddle: BEput = break even PUT = X – premiums sum BEcall = break even CALL = X + premiums sum If X > S T : PUT is exercised: the support asset is bought at the strike price, is sold at the market price, the premiums sum is cashed If X = S T : strategy is abandoned: maximum profit = premiums sum If X < S T : CALL is exercised: the support asset is sold at the strike price, is bought at the market price, the premiums sum is cashed X BE call BE put
14
XII. Option Strategies. Strangle Trading of 2 options (one put and one call) with the same support asset and expiration date. Put exercise price < Call exercise price Long strangle BEput = break even PUT = X put – premiums sum BEcall = break even CALL = X call + premiums sum If X put > S T : PUT is exercised: the support asset is sold at the put strike price, is bought at the market price and the sum of premiums is paid If X put < S T < X call : strategy is abandoned; the loss is maximum = sum of the paid premiums If Xcall < S T : CALL is exercised: the support asset is bought at the call strike price, is sold at the market price and the sum of premiums is paid BE put BE call X call X put
15
XII. Option Strategies. Strangle Short strangle BEput = break even PUT = Xput – premiums sum BEcall = break even CALL = Xcall + premiums sum If X put > S T : PUT is exercised: the support asset is bought at the put strike price, is sold at the market price, the premiums sum is cashed If X put < S T < X call : strategy is abandoned; the profit is maximum = sum of the paid premiums If Xcall < S T : CALL is exercised: the support asset is sold at the call strike price, is bought at the market price and the sum of premiums is cashed X put BE pu t X call BE call
16
XII. Exotic Options Asian Barrier - Knock out: - down and out - up and out - Knock in - down and in - up and in Lookback Currency-Translated Binary
17
XII. Option valuation Option premium depends on: - Intrinsic value (payoff) - Time value Sursa: Bodie, Z., A. Kane, and A. J. Marcus (2007), Essentials of Investments, 6th edition, McGraw Hill International Edition
18
XII. Option valuation Factors that should affect the value of an option: - Exercise price - Support asset price Delta - Change in delta Gamma - Time until the maturity Theta - Change in volatility Vega - Interest rate Rho - Dividends
19
XII. Option valuation Increase in variableCall pricePut price Support asset price (Delta) Exercise price Volatility (Vega) Time (Theta) Interest rate (Rho) Dividends
20
Bibliografie Anghelache G. (2004), Piaţa de capital. Caracteristici. Evoluţii. Tranzacţii, Editura Economică, Bucureşti Bodie, Z., A. Kane, and A. J. Marcus (2007), Essentials of Investments, 6th edition, McGraw Hill International Edition www.sibex.ro
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.