微信扫一扫
实时资讯全掌握
Bridget Moyle is a senior associate in the risk management division of ANM Financial Advisors (ANMFA). Moyle specializes in the use of derivatives to help ANMFA manage its various risk exposures. Moyle is meeting with two recently hired analysts, Jordan Petsas and Katy Iacocca. Petsas and Iacocca have been asked to prepare for a discussion on the fundamentals of futures, options, and swaps. Moyle asks, “Is it true that the futures price on an asset must equal the spot price of the asset on the expiration date of the futures contract? Explain why or why not.”Petsas responds, “At expiration, futures prices and spot prices must converge. If the spot price exceeds the futures price, then an investor could purchase the futures contract and execute the contract to purchase the underlying at the lower futures price and sell at the higher spot price and make an arbitrage profit. If the spot price is less than the futures price at expiration, then an investor could purchase the asset at the spot price and enter into a short futures contract to sell at the higher price, thus locking in a profit.”Moyle provides Petsas and Iacocca with the following information for a Treasury bond and asks them to calculate the price of a futures contract on this bond. The bond has a face value of $100,000, pays a 7% semiannual coupon, and matures in 15 years. The bond is priced at $156,000 and yields 2.5%. The futures contract expires in 8 months, and the annualized risk‐free rate is 1.5%. There are multiple deliverable bonds, and the conversion factor for this bond is 1.098.The next item on the agenda is a discussion of option valuation models. Moyle states, “We are currently considering the purchase of put options on shares of the Rousseff Corporation. Selected information is provided in Exhibit 1:  Can either of you tell me the valuation models we could use to determine if the option is undervalued?”Iacocca responds, “In general, we could value the option using either the Black‐Scholes‐Merton model or the binomial option pricing model. However, there is not enough information presented in order to use the Black‐Scholes‐Merton model.”“That’s correct,” states Moyle, and continues, “With respect to the Black‐Scholes‐Merton model, can you explain how the risk‐free rate, time to expiration, and volatility impact European option prices?”In answer to Moyle’s question Iacocca states, “Higher risk‐free rates result in lower call option and put option prices. Longer times to expiration result in higher call prices, but the impact on put prices is unclear. Higher volatility results in higher call and put option prices.”The group turns its attention to swaps. Moyle states, “As you all know, a plain vanilla interest rate swap allows the buyer of the swap to make a fixed payment and receive a variable payment. Can you explain how these interest rate swaps can be described as being equivalent to a combination of other assets?”Petsas responds, “An interest rate swap can be viewed as a series of forward rate agreements (FRAs) priced at the swap fixed rate or as a combination of a purchase of an interest rate call option and the purchase of an interest rate put option.”Finally, Moyle presents the term structure of LIBOR spot rates in Exhibit 2 and asks Iacocca and Petsas to use this information to calculate the annualized swap fixed rate on a one‐year interest rate swap with quarterly payments, where the underlying is 90‐day LIBOR.  |
暂无解析 |