logging in or signing up futures Abhil Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1900 Category: Business & Fin.. License: All Rights Reserved Like it (1) Dislike it (0) Added: April 16, 2008 This Presentation is Public Favorites: 2 Presentation Description No description available. Comments Posting comment... By: ramttr777 (5 month(s) ago) First of all i should say thanks for uploading such wonderful presentation to under stand the easy concept of futures and forward contract ,but Sir , i request kindly you to sent this presentation to my mail id ramttr777@yahoo.co.in, which will very useful one to me, for preparation of my professional exams. Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript The Pricing of Forward Contrasts and Futures: The Pricing of Forward Contrasts and Futures Wei Zhen Department of Stastistics Stanford University 2004-10-25Part I Introduction: Part I Introduction The Basic ideas of Pricing financial products Definition: No Arbitrage The Basic idea of Pricing : The Basic idea of Pricing No Free Pizza! Scientifically speaking: no Arbitrage. This takes moneyNo Arbitrage: No Arbitrage A trading strategy that invests 0 at initial and gains positive profit at time T with certainty.Part II Introduction to Forward contrasts and Futures: Part II Introduction to Forward contrasts and Futures Introduction of Derivatives Where are Derivatives traded? Examples of Derivatives Introduction of Forward Contracts Introduction of Futures Contracts Introduction: Derivatives: Introduction: Derivatives A derivative is an instrument whose value depends on the values of other more basic underlying variables Tips An underlying variable can be anything you can imagine, from stocks, gold, oil to the possibility that there will be snow tomorrow at Stanford, or the result of a presidential election!Where are Derivatives traded?: Where are Derivatives traded? Exchange Over-the-counter (OTC) A computer- and telephone-linked network of dealers at financial institutions, corporations, and fund managers Examples of Derivatives: Examples of Derivatives Forward Contracts Futures Contracts Swaps OptionsIntroduction: Forward Contracts: Introduction: Forward Contracts A forward contract is an agreement to buy or sell an asset at a certain time in the future for a certain price (the delivery price) It is traded in the OTC market Introduction: Futures Contracts: Introduction: Futures Contracts Agreement to buy or sell an asset for a certain price at a certain time T (maturity date) Similar to forward contract Whereas a forward contract is traded OTC, a futures contract is traded on an exchange Part III Terminologies: Part III Terminologies Terminology: long-short position Short selling Continuous compoundingLong-short position in trading: Long-short position in trading The party that has agreed to buy has what is termed a long position The party that has agreed to sell has what is termed a short positionShort Selling: Short Selling Short selling involves selling securities you do not own Your broker borrows the securities from another client and sells them in the market in the usual wayContinuous Compounding (1): Continuous Compounding (1) Suppose you invest A$ today with interest rate R per year. Then after n years, this value increases to: A(1+R)n$ If the rate is compounded m times per year, then the terminal value is A(1+R/m)nm$ Continuous Compounding (2): Continuous Compounding (2) Let m increase to infinity, we have the continuous compounding terminal value: AeRn where eR is the annual compound interest rate.Part IV No Arbitrage Pricing: Part IV No Arbitrage Pricing Notations An example Pricing FormulaNotations: Notations Suppose we want to calculate the current price of a futures contract on gold (the underlying variable)Reminder: Maturity date: Reminder: Maturity date Futures contract is an agreement to buy or sell an asset for a certain price at a certain time T An example (1): An example (1) Let: Let’s see what will happen… An example (2): An example (2) Borrow $40 with interest 5% per year 6 months Short a forward contract on gold 6 months Pay Gain Net profit: $2 ArbitragerNo Arbitrage Pricing: No Free Pizza! No Arbitrage Pricing Borrow/Sell S0 with interest r per year 6 months Short/long a forward con-tract with price F0 6 months Pay/Gain Gain/Pay No Arbitrage Net profit: $0 Arbitrager Conclusion: Pricing Formula: Conclusion: Pricing FormulaPart V Review: Part V Review Introduction Forward and Futures contrasts Terminologies long-short position Short selling Continuous compounding No arbitrage pricing Example and formulaSlide24: Thanks You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
futures Abhil Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1900 Category: Business & Fin.. License: All Rights Reserved Like it (1) Dislike it (0) Added: April 16, 2008 This Presentation is Public Favorites: 2 Presentation Description No description available. Comments Posting comment... By: ramttr777 (5 month(s) ago) First of all i should say thanks for uploading such wonderful presentation to under stand the easy concept of futures and forward contract ,but Sir , i request kindly you to sent this presentation to my mail id ramttr777@yahoo.co.in, which will very useful one to me, for preparation of my professional exams. Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript The Pricing of Forward Contrasts and Futures: The Pricing of Forward Contrasts and Futures Wei Zhen Department of Stastistics Stanford University 2004-10-25Part I Introduction: Part I Introduction The Basic ideas of Pricing financial products Definition: No Arbitrage The Basic idea of Pricing : The Basic idea of Pricing No Free Pizza! Scientifically speaking: no Arbitrage. This takes moneyNo Arbitrage: No Arbitrage A trading strategy that invests 0 at initial and gains positive profit at time T with certainty.Part II Introduction to Forward contrasts and Futures: Part II Introduction to Forward contrasts and Futures Introduction of Derivatives Where are Derivatives traded? Examples of Derivatives Introduction of Forward Contracts Introduction of Futures Contracts Introduction: Derivatives: Introduction: Derivatives A derivative is an instrument whose value depends on the values of other more basic underlying variables Tips An underlying variable can be anything you can imagine, from stocks, gold, oil to the possibility that there will be snow tomorrow at Stanford, or the result of a presidential election!Where are Derivatives traded?: Where are Derivatives traded? Exchange Over-the-counter (OTC) A computer- and telephone-linked network of dealers at financial institutions, corporations, and fund managers Examples of Derivatives: Examples of Derivatives Forward Contracts Futures Contracts Swaps OptionsIntroduction: Forward Contracts: Introduction: Forward Contracts A forward contract is an agreement to buy or sell an asset at a certain time in the future for a certain price (the delivery price) It is traded in the OTC market Introduction: Futures Contracts: Introduction: Futures Contracts Agreement to buy or sell an asset for a certain price at a certain time T (maturity date) Similar to forward contract Whereas a forward contract is traded OTC, a futures contract is traded on an exchange Part III Terminologies: Part III Terminologies Terminology: long-short position Short selling Continuous compoundingLong-short position in trading: Long-short position in trading The party that has agreed to buy has what is termed a long position The party that has agreed to sell has what is termed a short positionShort Selling: Short Selling Short selling involves selling securities you do not own Your broker borrows the securities from another client and sells them in the market in the usual wayContinuous Compounding (1): Continuous Compounding (1) Suppose you invest A$ today with interest rate R per year. Then after n years, this value increases to: A(1+R)n$ If the rate is compounded m times per year, then the terminal value is A(1+R/m)nm$ Continuous Compounding (2): Continuous Compounding (2) Let m increase to infinity, we have the continuous compounding terminal value: AeRn where eR is the annual compound interest rate.Part IV No Arbitrage Pricing: Part IV No Arbitrage Pricing Notations An example Pricing FormulaNotations: Notations Suppose we want to calculate the current price of a futures contract on gold (the underlying variable)Reminder: Maturity date: Reminder: Maturity date Futures contract is an agreement to buy or sell an asset for a certain price at a certain time T An example (1): An example (1) Let: Let’s see what will happen… An example (2): An example (2) Borrow $40 with interest 5% per year 6 months Short a forward contract on gold 6 months Pay Gain Net profit: $2 ArbitragerNo Arbitrage Pricing: No Free Pizza! No Arbitrage Pricing Borrow/Sell S0 with interest r per year 6 months Short/long a forward con-tract with price F0 6 months Pay/Gain Gain/Pay No Arbitrage Net profit: $0 Arbitrager Conclusion: Pricing Formula: Conclusion: Pricing FormulaPart V Review: Part V Review Introduction Forward and Futures contrasts Terminologies long-short position Short selling Continuous compounding No arbitrage pricing Example and formulaSlide24: Thanks