TAILIEUCHUNG - Lecture Financial institutions, instruments and markets (7e): Chapter 19 – Viney, Phillips

Chapter 19 - Futures contracts and forward rate agreements. In this chapter, you will: Consider the nature and purpose of derivative products, outline features of a futures transaction, review the types of futures contracts available through a futures exchange, identify why participants use derivative markets and how futures are used to hedge price risk,. | Chapter 19 Futures contracts and forward rate agreements Websites: Learning objectives Consider the nature and purpose of derivative products Outline features of a futures transaction Review the types of futures contracts available through a futures exchange Identify why participants use derivative markets and how futures are used to hedge price risk Identify risks associated with using a futures contract hedging strategy Explain and illustrate the use of an FRA for hedging interest rate risk Describe the use of a forward rate agreement for hedging interest rate risk Chapter organisation Hedging using futures contracts Main features of a futures transaction Futures market instruments Futures market participants Hedging: risk management using futures Risks in using futures markets for hedging Forward rate agreements (FRAs) Summary Hedging using futures contracts Futures contracts and FRAs are called derivatives because they derive their price from an underlying physical market product Two main types of derivative contracts 1. Commodity (. gold, wheat and cattle) 2. Financial (. shares, government securities and money market instruments) Derivative contracts enable investors and borrowers to protect assets and liabilities against the risk of changes in interest rates, exchange rates and share prices (cont.) Hedging using futures contracts (cont.) Hedging involves transferring the risk of unanticipated changes in prices, interest rates or exchange rates to another party A futures contract is the right to buy or sell a specific item at a specified future date at a price determined today The change in the market price of a commodity or security is offset by a profit or loss on the futures contract (cont.) Hedging using futures contracts (cont.) Example: A farmer wants to sell wheat in a couple of months, but

• Tài chính doanh nghiệp
• Financial institutions
• Financial Instruments
• Financial markets
• Financial system
• Pricing an option
• Options markets
• Lecture Financial markets and institutions
• Financial institutions markets
• Risks at financial institutions
• Market risk
• Savings institutions
• Credit unions
• Commercial banks
• Financial statements
• Financial markets and institutions
• Interest rates change
• Financial institutions exist
• Central banking
• Capital markets
• Money markets
• Interest rate fundamentals
• Interest rates
• Security valuation
• Federal reserve system
• Monetary policy
• Money market yields
• Bond markets
• Municipal bonds
• Mortgage markets
• Primary mortgage market
• Stock markets
• Common stock
• Foreign exchange markets
• Foreign exchange
• Derivative securities markets
• Futures markets
• Commercial bank liabilities
• Regulation of commercial banks
• Deposit guarantee funds
• Insurance companies
• Life insurance companies
• Securities firms
• Investment banks
• Mutual funds
• Hedge funds
• Pension funds
• Private pension funds
• Managing credit risk
• Balance sheet
• Managing liquidity risk
• Managing interest rate risk
• Insolvency risk
• Managing risk
• Loan sales
• Managing risk off the balance sheet