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Futures And Options Markets Solutions Pdf

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Student Solutions Manual And Study Guide For Fundamentals

To browse Academia. Skip to main content. By using our site, you agree to our collection of information through the use of cookies. To learn more, view our Privacy Policy. Log In Sign Up. Download Free DOC. Download Free PDF. Nguyen Tracey. Download PDF. A short summary of this paper. 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.

Fundamentals of futures and options markets : solutions manual and study guide

View larger. Request a copy. Buy this product. Alternative formats. This book contains solutions to the Practice Questions that appear at the ends of chapters in my book Options, Futures, and Other Derivatives , 9th edition, Global Edition. The questions have been designed to help readers study on their own and test their understanding of the material.

Introduction Practice Questions Consolidate Problem 1. Is the same true of an exchange-traded stock option? An exchange-traded stock option provides no funds for the company. It is a security sold by one investor to another. The company is not involved. By contrast, a stock when it is first issued is sold by the company to investors and does provide funds for the company.

Fundamentals of Futures and Options Markets Hull 7th

And then they began to sing again, first one or two, then the whole damn collection of them at once. Not only had he chosen not to denounce me as a capricious destroyer of Horch machines, but what was this about coming to Earth with us. Joe called him by name, but the bartender pretended not to hear as he hefted a rack of dirty glasses back into the kitchen. Is this how you treat a customer. The pillow under his nose stank of her perfume.

Fundamentals of futures and options markets : solutions manual and study guide

The silent beauty of this place deserves our respect.

Fundamentals of futures and options markets : solutions manual and study guide

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.

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. After some minutes, she wiped her eyes along with half the room and stood shaking her head slowly as the room settled into silence. When she raised her face, the humour had died in it. Here this man is working with God, thinking about God, living with God, every day, and still he does not trust God.

And then they began to sing again, first one or two, then the whole damn collection of them at once. Not only had he chosen not to denounce me as a capricious destroyer of Horch machines, but what was this about coming to Earth with us. Joe called him by name, but the bartender pretended not to hear as he hefted a rack of dirty glasses back into the kitchen. Is this how you treat a customer. The pillow under his nose stank of her perfume. His feet got sluggish and he was reduced to pawing Ricky as he rushed past, or elbowing him, or hip-checking him. Ricky scored with leaners and fades and baby hooks, and at Joe finally exploded.

If you're an educator

ГЛАВА 62 Коммандер и Сьюзан стояли у закрытого люка и обсуждали, что делать. - Итак, внизу у нас погибший Чатрукьян, - констатировал Стратмор.  - Если мы вызовем помощь, шифровалка превратится в цирк. - Так что же вы предлагаете? - спросила Сьюзан. Она хотела только одного - поскорее уйти. Стратмор на минуту задумался. - Не спрашивай меня, как это случилось, - сказал он, уставившись в закрытый люк.

Она понимала, что говорила с ним слишком сурово, и молила Бога, чтобы в Испании у него все прошло хорошо. Мысли Сьюзан прервал громкий звук открываемой стеклянной двери. Она оглянулась и застонала. У входа стоял криптограф Грег Хейл. Это был высокий мужчина крепкого сложения с густыми светлыми волосами и глубокой ямкой на подбородке. Он отличался громким голосом и безвкусно-крикливой манерой одеваться.

Student Solutions Manual for Options, Futures, and Other Derivatives, Global Edition, 9th Edition

 Вы хотите дать взятку представителю закона? - зарычал. - Нет, конечно. Я просто подумал… - Толстяк быстро убрал бумажник.  - Я… я… - Совсем растерявшись, он сел на край постели и сжал руки. Кровать застонала под его весом.

Сьюзан наклонилась к Дэвиду и шепнула ему на ухо: - Доктор. Он смотрел на нее с недоумением. - Доктор, - повторила.  - Скажи первое, что придет в голову.

Она помнила его тело, прижавшееся к ее телу, его нежные поцелуи. Неужели все это был сон. Сьюзан повернулась к тумбочке.

Solution Manual for Fundamentals of Futures and Options Markets 7th Edition by Hull

Танкадо приближается справа, Халохот - между деревьев слева. - У нас почти не осталось времени, - сказал Фонтейн.

 Какая редкость! - саркастически парировала Сьюзан. - Он участвовал в разработке ТРАНСТЕКСТА. Он нарушил правила. Из-за него чуть было не произошел полный крах нашей разведки.

Беккер посмотрел в другую сторону и увидел, что женщина, сидевшая рядом, уже ушла и весь ряд вплоть до центрального прохода пуст. Не может быть, что служба уже закончилась. Это невозможно. Да мы только вошли. Но, увидев прислужника в конце ряда и два людских потока, движущихся по центральному проходу к алтарю, Беккер понял, что происходит.

 Сто десять? - оживился Джабба.  - Сколько будет сто десять минус тридцать пять и две десятых. - Семьдесят четыре и восемь десятых, - сказала Сьюзан.  - Но я не думаю… - С дороги! - закричал Джабба, рванувшись к клавиатуре монитора.

Но снова и снова он протягивал руку, так, чтобы люди обратили внимание на кольцо.

 Я не электрик. Позвони в технический отдел. - В куполе нет света. - У тебя галлюцинации. Тебе пора отправляться домой.

Сьюзан многим ему обязана; потратить день на то, чтобы исполнить его поручение, - это самое меньшее, что он мог для нее сделать. К сожалению, утром все сложилось не так, как он планировал. Беккер намеревался позвонить Сьюзан с борта самолета и все объяснить.

Фонтейн не мог понять, в чем дело, но, какими бы ни были причины ее состояния, выяснять это сейчас не было времени. - Нужно решать, сэр! - требовал Джабба.  - Немедленно.

Student Solutions Manual And Study Guide For Fundamentals

 Дэвид. - Это Стратмор, - прозвучал знакомый голос. Сьюзан плюхнулась обратно в ванну.

Но мне она неизвестна. - Видите ли, ситуация не столь проста. Вы сказали, что самолет улетел почти пустой. Быть может, вы могли бы… - Право же, без фамилии я ничего не могу поделать. - И все-таки, - прервал ее Беккер.

 Он ничего не спрашивал про ТРАНСТЕКСТ. - Нет. Но если он посмотрит на монитор и увидит в окне отсчета значение семнадцать часов, то, будьте уверены, не промолчит. Стратмор задумался. - С какой стати он должен на него смотреть? - спросил .

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