100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Derivatives Summary (BS3385) (Grade: 75%) £8.52   Add to cart
Quickly navigate to
Preview
  2.  
  3. Aston University, Birmingham (Aston)
  4.  
  5. Derivatives (BS3385)

Summary

Derivatives Summary (BS3385) (Grade: 75%)
 87 views  0 purchase

The course Derivatives at Aston University is an important course for students studying finance, economics, and related fields. This course provides students with a detailed understanding of derivatives, their uses, and the associated risks. The summary of this course begins with an introduction...

[Show more]

Preview 3 out of 18  pages

Document information

  • February 19, 2023
  • 18
  • 2022/2023
  • Summary

Subjects

Written for

All documents for this subject (1)

Seller

avatar-seller
jan-willemdenys

Content preview

Notes

Topic 1: Futures markets and trading
Visualisation :




Short F orward Contract :
P rofit(Loss) = #shares ∗ (contract price − share price)
Share price is at expiration.

Example : 340 shares ∗ ($3, 375 − $3, 280) = +$32, 300
Long F orward Contract :
P rofit(Loss) = #shares ∗ (share price − contract price)


Notes 1

, Share price is at expiration.

Example : 12, 000 barrels ∗ ($67 − $24) = +$372, 000
Margin Call :
Happens if the Margin Account falls below Maintenance margin
Cashflow in margin account (for each contract):

P rofit(Loss) = #contracts ∗ (share price −
contract price) = (Initial margin −
maintenance margin)
Solve for share price.

Example : 15, 000 pounds ∗ (Ft − $1.6) = −$1, 500 →
Ft = $1.5
Withdrawal of $X for Y contracts:

P rofit(Loss) = #contracts ∗ (share price −
contract price) = X
Y
Solve for share price.



Topic 2: Futures Pricing and Hedging
F orward P rice : F = (S − I) ∗ e(r−q)T
S : Current P rice
r : Riskfree Compounded Interest Rate
q : Dividend Yield on Stock Index
X
T = time in years = 12
I = P resent Value of all relevant dividend payments
P resent Value of all relevant dividend payments : I = ∑ vi ∗
−rT
e
v = value of dividend i
P erfect Hedge : Uncertainty about performance of investment is
completely eliminated.




Notes 2

, Imperfect Hedge : Hedging error can be either positive or negative,
which makes is possible for the Imperfec to have a better outcome.

Imperfect Hedge still has some price risk.



Topic 3: Options Markets and Trading




Topic 4: Principles of Options Pricing
Shortcuts :




Notes 3

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller jan-willemdenys. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for £8.52. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

62890 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now

Start selling
£8.52
  • (0)
  Add to cart