Determination of Forward and Futures Prices von Edu Pristine

Dozent des Vortrages Determination of Forward and Futures Prices

Edu Pristine

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... Consumption assets: Assets held primarily for consumption (examples: copper, oil and pork bellies) Gambling – Short Selling an example: Short selling involves selling securities that are not owneduppose an investor short sells 500 IBM shares, the broker will borrow ...

... hedgers that want to remove the volatility of the underlying, hence delivery / cash settlement usually takes place Futures -Traded on exchanges -Standard contracts - Clearing house and daily mark to market ...

... continuously compounded risk free in terest rate, r *F 0 = S 0(1+r ) t in the case of annual risk free interest rate, r Where: 0: forward price 0: Spot price t: time of the contract Known income from underlying If the underlying asset on which ...

... continuous dividend yielding underlying f = S 0e -qt – Ke -rt For discrete dividend paying stock f = S 0– I – Ke -rt Index futures: A stock index can be considered as an asset that pays dividends and the dividends paid are the dividends from the underlying stocks in the index. If q is the dividend yield rate, then the futures price ...

... futures prices are usually assumed to be the same. When interest rates are uncertain, they are slightly different ...

... will always think in Rupees not dollars!!!!!), which imp lies foreign currency (r f) in his case would be ...

... series of futures contracts to increase the life of a hedge. Each time we switch from 1 futures contract to anot ...

... the securities from another client and sells them in the market in the usual way. At some stage the investor will close the position by purchasing 500 IBM shares. The investor takes the profit if the stock prices have declined, ...

... and are not as rigid in their stated terms and conditions. Credit risk is high. High customization. Settlement at the end of contract and on a specific date. Mostly used ...

... which the forward contract is entered into provides an income with a present value, I, then the forward contract would be valued as: F0 = (S0 - I )ert. Known yield from underlying. If the underlying asset on which the forward contract is entered into provides ...

... (F0) remains the same. The value of the forward is basically the present value of the difference in the delivery price and the forward price. Value of a long forward, f, is given by the PV of the pay off at time T: ƒ = (F0 - K)e - rT. K is fixed in the contract, while F keeps changing on an everyday basis ...

... theory A strong positive correlation between interest, rates and the asset price implies the futures price is ...