1. Chapter 20: Foreign Currency Futures and Options
熊家财
江西财经大学会计学院
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2. Chapter 20: Foreign Currency Futures and Options
20.1 The Basics of Futures Contracts
20.2 Hedging Transaction Risk with Futures
20.3 Basics of Foreign Currency Option Contracts
20.4 The Use of Options in Risk Management
20.5 Combinations of Options and Exotic Options
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3. 20.1 The Basics of Futures Contracts
Futures Versus Forwards
Foreign currency futures contracts
Exchange trading
Standardized amounts
Fixed maturities
Credit risk
Commodity futures trading commission (CFTC) as a futures commission merchant (FCM)
Clearing member/clearinghouse
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4. 20.1 The Basics of Futures Contracts
Futures Versus Forwards
Foreign currency futures contracts
Exchange trading
Standardized amounts
Fixed maturities
Credit risk
Commodity futures trading commission (CFTC) as a futures commission merchant (FCM)
Clearing member/clearinghouse
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5. 20.1 The Basics of Futures Contracts
Margins
Margin account
Initial margin
Marking to market
Maintenance margins
Margin call
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6. 20.1 The Basics of Futures Contracts
Marking to market
Settle price
Open interest
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7. Exhibit 20.1 An Example of Marking to Market in the Futures Market
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8. 20.1 The Basics of Futures Contracts
The Pricing of Futures Contracts
The payoff on a forward contract
The payoff on a futures contract
Why futures can differ from forwards
Wall street journal futures quotes
Open price
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9. Exhibit 20.2 Futures Quotes (Wall Street Journal, December 2, 2004)
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10. 20.2 Hedging Transaction Risk with Futures
Hedging at Nancy Foods
The Hedging Decision
Potential Problems with a Futures Hedge
Basis risk
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11. Exhibit 20.3 Hedging a Receivable with Futures
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12. 20.3 Basics of Foreign Currency Option Contracts
Introduction
Foreign currency option contract
Basic Option Terminology
Foreign currency call option
Foreign currency put option
Option premium
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13. 20.3 Basics of Foreign Currency Option Contracts
Basic Option Terminology (cont’d)
European vs. American options
European option
American option
Early exercise
Strike prices and intrinsic value
Strike price
Exercise price
Intrinsic value
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14. 20.3 Basics of Foreign Currency Option Contracts
Options Trading
Currency options on the Philadelphia stock exchange
Currency options on the Chicago mercantile exchange
Wall street journal options quotes
Exchange-listed currency warrants
Currency warrants
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Exhibit 20.4 Options on Futures Quotes (Wall Street Journal, December 2, 2004)
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16. 20.4 The Use of Options in Risk Management
The Use of Options in Risk Management: Overview
Using Options to Hedge Transaction Risk
Hedging With Options as Buying Insurance
Speculating With Options
Options Valuation
An Alternative Representation of Put-Call Parity
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17. 20.4 The Use of Options in Risk Management
Using Options to Hedge Transaction Risk
Allows a hedge but maintains the upside potential from favorable exchange rate changes
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18. Exhibit 20.5 Hedging Pound Revenues
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19. Exhibit 20.6 Hedging Swiss Franc Costs
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20. 20.4 The Use of Options in Risk Management
Hedging With Options as Buying Insurance
Hedging foreign currency risk with forwards and options
Options as insurance contracts
As amount of coverage increases so does the cost (premium) to insure
Changing the quality of the insurance policy
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21. Exhibit 20.7 Hedging and Speculating Strategies
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22. Exhibit 20.8 Alternative Option Hedges
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23. 20.4 The Use of Options in Risk Management
Speculating With Options
Speculating on foreign currency receivables
Speculating on foreign currency liabilities
Foreign currency put option
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24. Exhibit 20.9 Speculating with Pound Revenue
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25. 20.4 The Use of Options in Risk Management
Options Valuation
The intrinsic value of an option
The time value of an option
Increasing the exercise price
An increase in the variance
Increasing the time to expiration
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26. Exhibit 20.10 Probability Distribution of Future USD/EUR
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27. Exhibit 20.11 Probabilities of Exercising Alternative Options
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28. Exhibit 20.12 Different Probability Distributions of Future USD/EUR
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29. 20.4 The Use of Options in Risk Management
Options Valuation (cont’d)
Put-call parity for foreign currency options
Put-call parity
Synthetic forward contract
Conversion
Reversal
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30. 20.5 Combinations of Options and Exotic Options
Combinations of Options and Exotic Options: Overview
Introduction
Range Forwards and Cylinder Options
Other Exotic Options
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31. 20.5 Combinations of Options and Exotic Options
Introduction
Exotic options
Options with different payoff patterns features than the basic options
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32. 20.5 Combinations of Options and Exotic Options
Range Forwards and Cylinder Options
Range forward contract
Cylinder options
Synthetic cylinder options
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33. 20.5 Combinations of Options and Exotic Options
Other Exotic Options
Average-rate options
Barrier options
Lookback options
Digital options
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