File Name: fundamentals of futures and options markets solution .zip
Because it means that that little girl really is okay. Bonnie was almost lost to the world after a visit from a monster. Her soul had been flickering out there on the edge of forever, a tiny candle in a rainstorm.
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The mining company can estimate its production on a month by month basis. It can then short futures contracts to lock in the price received for the gold. For example, if a total of 3, ounces are expected to be produced in September and October , the price received for this production can be hedged by shorting a total of 30 October contracts. This ignores the time value of money. The profit as a function of the stock price is shown in Figure S1.
Most investors will use the contract because they want to do one of the following: a Hedge an exposure to long-term interest rates. Problem 1.
An airline executive has argued: "There is no point in our using oil futures. There is just as much chance that the price of oil in the future will be less than the futures price as there is that it will be greater than this price. It may well be true that there is just as much chance that the price of oil in the future will be above the futures price as that it will be below the futures price.
This means that the use of a futures contract for speculation would be like betting on whether a coin comes up heads or tails. But it might make sense for the airline to use futures for hedging rather than speculation. The futures contract then has the effect of reducing risks. It can be argued that an airline should not expose its shareholders to risks associated with the future price of oil when there are contracts available to hedge the risks.
The statement means that the gain loss to the party with the short position is equal to the loss gain to the party with the long position. In total, the gain to all parties is zero. A company knows that it is due to receive a certain amount of a foreign currency in four months.
What type of option contract is appropriate for hedging? A long position in a four-month put option can provide insurance against the exchange rate falling below the strike price. It ensures that the foreign currency can be sold for at least the strike price.
A United States company expects to have to pay 1 million Canadian dollars in six months. Explain how the exchange rate risk can be hedged using a a forward contract; b an option. The company could enter into a long forward contract to buy 1 million Canadian dollars in six months. This would have the effect of locking in an exchange rate equal to the current forward exchange rate. Alternatively the company could buy a call option giving it the right but not the obligation to purchase 1 million Canadian dollar at a certain exchange rate in six months.
This would provide insurance against a strong Canadian dollar in six months while still allowing the company to benefit from a weak Canadian dollar at that time. Further Questions Problem 1.
What is the difference between the positions of the traders? Show the profit per ounce as a function of the price of gold in one year for the two traders. Figure S1. The risk to the investor is that the stock price plunges to a low level. The current exchange rate is 1. Discuss how forward and options contracts can be used by the company to hedge its exposure.
The company could enter into a forward contract obligating it to buy 3 million euros in three months for a fixed price the forward price. The forward price will be close to but not exactly the same as the current spot price of 1. An alternative would be to buy a call option giving the company the right but not the obligation to buy 3 million euros for a a particular exchange rate the strike price in three months.
The use of a forward contract locks in, at no cost, the exchange rate that will apply in three months. The use of a call option provides, at a cost, insurance against the exchange rate being higher than the strike price.
This is known as a bull spread and will be discussed in Chapter The profit is shown in Figure S1. What should the arbitrageur do?
Assume that the cost of storing gold is zero and that gold provides no income. The arbitrageur should borrow money to buy a certain number of ounces of gold today and short forward contracts on the same number of ounces of gold for delivery in one year. Discuss how foreign currency options can be used for hedging in the situation described in Example 1. An investor who feels that the price of the stock will increase is trying to decide between buying shares and buying 2, call options 20 contracts.
What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable? The investment in call options entails higher risks but can lead to higher returns. There are some circumstances where the put option alternative leads to a better outcome and some circumstances where the stop-loss order leads to a better outcome.
The trader has a long European call option with strike price K and a short European put option with strike price K. Suppose the price of the underlying asset at the maturity of the option is T S. The trader's position is equivalent to a forward contract with delivery price K. Suppose that F is the forward price. Because the forward contract is equivalent to a long call and a short put, this shows that the price of a call equals the price of a put when the strike price is F.
Under what circumstances will the holder of the option make a gain? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option. Draw a diagram showing how the profit on a short position in the option depends on the stock price at the maturity of the option.
Under what circumstances does the investor make a gain? The Chicago Board of Trade offers a futures contract on long-term Treasury bonds. Characterize the investors likely to use this contract.
A trader enters into a short forward contract on million yen. A trader enters into a short cotton futures contract when the futures price is 50 cents per pound. The contract is for the delivery of 50, pounds. How much does the trader gain or lose if the cotton price at the end of the contract is a A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price and maturity.
Describe the trader's position. Under what circumstances does the price of the call equal the price of the put? Explain what the investor has agreed to. Under what circumstances will the trade prove to be profitable?
What are the risks? The investor is comparing two alternatives to limit downside risk. Discuss the advantages and disadvantages of the two strategies. On July 17, , an investor owns Google shares. As indicated in Table 1. Download file. Remember me on this computer. Enter the email address you signed up with and we'll email you a reset link. Need an account? Click here to sign up.
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Explain what happens when an investor shorts a certain share. The investors broker borrows the shares from another clients account and sells them in the usual way. To close out the position, the investor must purchase the shares. The broker then replaces them in the account of the client from whom they were borrowed. The party with the short position must remit to the broker dividends and other income paid on the shares. The broker transfers these funds to the account of the client from whom the shares were borrowed. Occasionally the broker runs out of places from which to borrow the shares.
Because it means that that little girl really is okay. Bonnie was almost lost to the world after a visit from a monster.
Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. Hull Published Computer Science. This book contains solutions to the questions and problems that appear at the ends of chapter in the sixth edition. The questions and problems have been designed to help readers study on their own and test their understanding of the material. They range from quick checks on whether a key point is understood to much more challenging applications of analytical techniques.
For undergraduate courses in derivatives, options and futures, financial engineering, financial mathematics, and risk management. A reader-friendly book with an abundance of numerical and real-life examples. Based on Hull's Options, Futures and Other Derivatives , Fundamentals of Futures and Options Markets presents an accessible and student-friendly overview of the topic without the use of calculus. Packed with numerical examples and accounts of real-life situations, this text effectively guides students through the material while helping them prepare for the working world. Offer the latest software: DerivaGem version 2. Version 2.
Papa said we would have to borrow to build, would not be allowed to enter into an incestuous union with him. No one at the desk when they reached the ground floor. My grandmother Ilona paid very little attention to me once it became apparent that I had no magic in me. She struggled with herself to restrain her squirming. We will pay whatever ransom they demand, we brought her here.
Solution Manual for Fundamentals of Futures and Options Markets 7th Edition by Hull. Nguyen Tracey. Download PDF. Download Full PDF Package. This paper.
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Он протягивал свою изуродованную руку… пытаясь что-то сообщить. Танкадо хотел спасти наш банк данных, - говорила она. - А мы так и не узнаем, как это сделать. - Захватчики у ворот.
Мою колонку перепечатывают издания по всему миру. - Сэр! - Беккер поднял обе руки, точно признавая свое поражение. - Меня не интересует ваша колонка. Я из канадского консульства. Я пришел, чтобы убедиться, что с вами все в порядке.
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С какой стати университетский профессор… Это не университетские дела. Я позвоню и все объясню. Мне в самом деле пора идти, они связи, обещаю.
Единственный мужчина, которого она любила. Самый молодой профессор Джорджтаунского университета, блестящий ученый-лингвист, он пользовался всеобщим признанием в академическом мире. Наделенный феноменальной памятью и способностями к языкам, он знал шесть азиатских языков, а также прекрасно владел испанским, французским и итальянским. На его лекциях по этимологии яблоку негде было упасть, и он всегда надолго задерживался в аудитории, отвечая на нескончаемые вопросы. Он говорил авторитетно и увлеченно, не обращая внимания на восторженные взгляды студенток.
- Он обесточен. - Вы оба настолько заврались, что в это даже трудно поверить.
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