国际财务课后习题答案chapter7.docx

1、国际财务课后习题答案chapter7CHAPTER 7 FUTURES AND OPTIONS ON FOREIGN EXCHANGESUGGESTED ANSWERS AND SCX.UTIONS TO END-OF-CIIAPTERQUESTIONS AND PROBLEMSQUESTIONS1 Expl ain the basi c dificrcnces between the operation of a ciurcncy ibrward market and a fiitures market.Answer: Tlie forward mark巩 is an OTC market

2、where the forward contract for purchase or sale of foreign currency is tailor-made between the client and its international bank No money cliangess hands miti l tlie maturity d:e of the contract when deliveiy and receipt are typically made. A fijtiues contract is ail exchaiige-tiaded instniment with

3、 standaidized featuies specifying contiact size and deliveiy date. Futiues coohacts aie m aiked-to-iiiarket daily to reflect chaiig es in tlie settlement pii ce. Delivery i s seldom made in a futures market. Rather a lversi ng trade is made to close out a long or short position.2.In order for a deri

4、vatives market to fimetion most cfFio cntly, two types of economic agetits are needed: hedgers atid speculdtors ExplainAnswer: Two types of niarket paiticipants arc ncccssaiy for the 巴尸五 ci ent operat on of a derivatives market： speculators and hedgers. A speculator attempts to profit fiom a ijiange

5、 in the futures price To do this, the speculator wi 11 take a long or sliort position iti a futures contract depending upon his expectations of iuture price movern ent. A hedger, on- tlie-otlier- han d, desir es to avoid price var iation by locking in a purchase pri ce of die wide dying asset thioug

6、li a long position in a liitures ccutract ci a sales price through a short positi on. hi effect, the hedger passes off the iisk of price vai iation to the speculator who is better able, or al I ea?t more willing, to bear this risk.3.Wliy are most fiitiu es positions cl os ed out th rough a reversing

7、 trade rath er than held to deliveiy?Answer: In forward markets，approximately 90 percent of all cont勺cts that 前e initially establishucl result in the short making deliveiy to the long of the asset underlying the contract. This is natural because tlie term s of forward contracts ai e tailor ni ade be

8、tween th c long and s hort By contrast, only about one percent of ciutciicv fiitiwcs cotit roots result in del i very While futures contracts arc useful for speculation and hedging, their standardized delivery dates make them unlikely to correspond to the actual future dates wiicti forogii cxdiange

9、transactions will occur. Tlius, they are genetal closed out in arcszeiing trade. In fact, the commission that buyers mid sell ers pay to transact hi the futures maket is s singl c amount that covei the round-trip tiTais actio ns of initiating and closing out the position4.How can the FX firtut es ma

10、iket be used for pH cc discovery?Answer: To the extent tliat FX forward pri oes are ail unbiased predictor of fiiture spot exchange rates, tlie market anticipates whether one cuiyenoy will appreciate or depreciate versus another Because FX Eitiires conti-acts trade in an expi ration cycle, clifleren

11、t c onto acts expire at diHeient peiiDclic dates into tlie iiiture Tlie patteiri of the prices of these contacts provides information as to tlie mai kefs ciin ent belief about th巴 rd ative fiiture value of one ciui ency versus anothei at the scheduled expiration dates of the contracts. One will geni

12、ally see a steadily appreci ating or depreciating pattern; howevei; it may be mixed at times. TTius, the fiitures market is usefill for price dscovery. i.e., obtaining the markets forecast of the spot exchange rate at different future： d“tES5 What is tlie major di fFerenoe in the obligation of one w

13、ith a long positi on in a fijturcs (or fonvaid) contract in comparison to an options confraot?Answer: A futures (or forwaid) contract is a vehicle for buying or sei ing a staled amount of foreign exchange at a stated price per unit at a specified time in tlie fiitiue If the long holds the contract t

14、o the delivery date, he pays tlie effective contractual fiitures (or foiwatd) price, regardless; of whether i t is an advantageous pti ce in oompaiiscn to tlie spot price at the delkeiy date. By oontiasf, ail option is a contiact giving the loris tlie riglit to buy ci sell a given quantity of an ass

15、et at a specified price at some time in the fiihn e? but not enforcing any obligation on him if the spot pti ce is more favorable tliaii the exercise prize. Because th巴 opti on ownei* does not have to exercise t he option if it i s to his disadvaiite, the option has a price, or premium, whereas no p

16、rice is p已id at inception to enter into a futures (orforward) contract6. Wliat is nieait by the terminology that an option is in-, at-, or oiitof the-money?Answer： A call (put.) option with St E (E S) is refetred to as trading in-thc-monejr If E tlie option is hading at-tlic-money. If Sf E (E5.the l

17、aiger (smaller) is relative to rf, arid6.the gj eater is aWhen and are not too niucli different in size, a European FX call and put will increase in price when the option term-to-matiirity increases Howe、曰；when 飞 is very mu ch laigei than a European FX cal I will increase in price, but the put premi

18、um wil I decrease, whe厂i the option tenn-to-m increascs. The opposite i s tme when i s vety much greater than r$. ForAmerican 二X opti oils tlic analysis is I傑s complicated Since a longer tenn American option can be exercised on any date that a shorter tenn opti on can be exercised or some later date

19、, it follows tliat tlie all else remaining the sarne. tlie longer tenn Americen opti on will sell at a price at least as laige as tlie shorter tenn option.PROBLEMS1. Assiunc todar，s settlement price on a CME EUR futures contract is S1.314O/EUR. Yon have a short position in one contract. Your perform

20、aiicc bond accoimt ciurcntly has a balance of $L 700. The next tliicc days, scttleincnt prices etc $1.3126, $1.3133, arid S1.3049. Calculate the changes in tlic perfonnaiicc bond account from d已ily marking-to-market andthe balance of tlie perfotTnance bond accoiuit after the third day.Solution: $1,

21、700 +$1.314 O S1.3126) + ($1.3126 -Si. 3133)+ (Sl.3133 - SI.3049)XEUR125,000= $2,837.50,where EUR125, 000 is the contractual size of one EUR contract.2- Do problem 1 again assuming you have a long position in the futures conti actSolution： $1,700+ ($1.3126 $1.3140)+($ 1 31 33 S13126)十($L3(Mg $1 .313

22、3) xEUR125, 0OO= $562.50,where EUR125, OOO istlie contrachial sizeuf one EUR contract.With only $562 50 in your petfonnancc bond account, you would experience a tnargiti call requesting that additional fijnds be added to youipeiionnance bond account to bring tlic balance back up to tlie initial petd

23、onnaiice bond level3 Using the quotations in Exlubit 7.3、cal cul ate the face value of the open interest in the June 2005 Swiss franc fiitures contiact Solution： 2401 contracts x SF125Q00 二 SF262, 625JD00.vvheie SF125, 0C0 is tlie couti actnal size of one SF contract 4.Using tlie quotations in Exlii

24、bit 7. 3, note that the June 2005 Mexican peso Mur es contract has a price of SO. 08845. You believe tlie spot piice in June wil be $ 0. 09500. WhM speculative position would you enter into to attempt to profit frotn your beliefs ? Calculate your anticipated profits, assuming you taP；e aposition in

25、tlwee contracts Wliat is the size of your profit (loss) if the fhtures price is indeed an unbiased predictor of the fiitii re spot price and this price materializes?Solution： If you expect the Mexi can peso to li se from SO.08845 to SO. 09500, you would take a long position in fiitiucs since the fii

26、tiires price of $ 0.08845 is less than your expected spot price.Your anticipated profit from a I ong position in tiirec contracts is: 3 x ($0.09 500 -$0 08845)xMP500.0C0= $9, 825.00. where MP500.00C1 isthe contractual size of one MP contrast.If the fiitures price is sn unbiased predictor of the expe

27、cted spot price, the expected spot price is tlic iutca cs price of $0.08845/MP If tliis spot price materializes, you will not hsrsre any profits or losses from your short position in three futures contracts: 3 x ($O 08845 -$0.08845) XMP500.000 =0.5.Do problem 4 again assuming you believe the Jiuie 2

28、005 spot price will be $0.08500. Solution: If you expect tlie Mexi can psso to depieci ate fi-oni $ 0.08&15 to $ 0.07500, you wou d take a short position in fiitures since the futures price of $0.08845 is greater tliaii your expected spot priceYciu anticipated p io fit from a sh or t pos ition in th

29、ree contract s is： 3 x i, $ 0 08845 $0.07500) xXlP500,000= $20,175.00 If tlie fiitiues price is an unbiased predictor of the Future spot price and this price materializes? you will not profit or lose from your long futwes pzisiti on.6.George Johnson is considering a possible ax-motith SI 00 million

30、LJBClR-bascd, floating-ratebank loan to Hind a project 址 terms shown in the tabic below. Johnson fears a possible ti ss in the LIBOR rate by December mid wants to use the December Eurodollar fiitures contrast to hedge thi s risk Tlie contract expires December 20 1999. has a US$ 1 mi Ilion contract size,and a discount yield of 7. 3 pei centJoints on will ignore the cash flow implications of marking to market、i nitial margin requirements, and any timing niisinatch between ex change-tiaded fiitures contiact cash flows and tlie interest payments due in March.Loan Terms、c