TAILIEUCHUNG - Ebook An introduction to derivatives and risk management (10th edition): Part 2
(BQ) Part 2 book "An introduction to derivatives and risk management" has contents: Interest rate forwards and options, advanced derivatives and strategies, managing risk in an organization, financial risk management techniques and applications; forward and futures hedging, spread, and target strategies,.and other contents. | Find more at PART II FORWARDS, FUTURES, AND SWAPS Chapter 8 Principles of Pricing Forwards, Futures, and Options on Futures Chapter 9 Futures Arbitrage Strategies Chapter 10 Forward and Futures Hedging, Spread, and Target Strategies Chapter 11 Swaps 273 Find more at CHAPTER 8 CHAPTER OBJECTIVES Introduce the basic concepts of price and value for futures and forward contracts Show the conditions under which futures and forward prices are equivalent and when they are different Show how the spot price of an asset is determined from the cost of storage, the net interest, and the risk premium Present the cost of carry formula for the theoretical fair price of futures and forward contracts Introduce the concepts of contango, backwardation, and convenience yield Present the two opposing views to the question of whether futures prices reward speculators with a risk premium Illustrate how intermediate cash flows such as dividends affect the cost of carry model Present put– call–forward/futures parity Present the principles of pricing options on futures 274 Principles of Pricing Forwards, Futures, and Options on Futures Even if we didn’t believe it for a second, there’s an undeniable adrenaline jab that comes from someone telling you that you’re going to make five hundred million dollars. Doyne Farmer Quoted in The Predictors, 1999, p. 119 We are now ready to move directly into the pricing of forward and futures contracts. The very nature of the word futures suggests that futures prices concern prices in the future. Likewise, the notion of a forward price suggests looking ahead to a later date. But as we shall learn, futures and forward prices are not definitive statements of prices in the future. In fact, they are not even necessarily predictions of the future. But they are important pieces of information about the current state of a market, and futures and forward contracts are powerful tools for managing risk. In .
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