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ABF305 Investment Management
Lecture 8
ABF305投资管理
讲座8
Today’s lecture topic is Futures and Forwards.
今天的演讲题目是期货和远期。
Futures and Forwards represent a form of hedging and in addition speculation.
期货和远期指某种形式的对冲和投机除了。
What do they represent?
他们代表什么？
Imagine that you are a producer of grain which would have a crop ready some time in the future, then you might want to ensure a minimum price for your grain to eliminate any uncertainty.
试想一下，你是一个粮食生产，这将对作物准备在未来的一段时间，那么你可能想以确保粮食的最低价格，以消除任何不确定性。
On the other hand, there will also be people who want to buy gain sometime in the future to ensure that they have a ready supply. Take for example a food company. Since a food company might also want some kind of assurance regarding the price that they will pay for their grain in the future, a market was developed.
另一方面，也将人谁想要购买收益在未来的某个时候，以确保他们有一个现成的供应。举个例子一个食品公司。由于某食品公司也可能需要某种形式的保证，他们将支付他们在未来的粮食价格，市场的开发。
A forward market is simply a place for which buyers and sellers of a commodity come together and arrive at a contract to exchange goods and services at an agreed price for some time in the futures.
远期市场简直是买家和卖家的商品的地方走到一起，并达成了一份合同，按约定价格交换商品和服务在期货一段时间。
A forward contract is an agreement between two counterparties that requires the exchange of a commodity or security at a fixed time in the future at a predetermined price. (Reilly and Brown ‘Investment Analysis and Portfolio Management’ 8th Edition).
A futures contract is an agreement that provides for the future exchange of a particular asset at a specified delivery date in exchange for a specified payment at the time of delivery. (Reilly and Brown ‘Investment Analysis and Portfolio Management’ 8th Edition).
The main difference is that futures feature formalized and standardized characteristics.
主要的区别是,期货功能正式和标准化的特点。
If a forward can be interpreted as a contract which is customized for your specific needs, say for example you can choose the delivery date and the amount of the commodity exchange, for example for grain a certain amount of bushels. Then in contrast futures represent a generic contract. The delivery date is specified as is the commodity amount.
如果一个前锋可以被解释为一个合同是定制您的具体需求,比如说你可以选择交货日期和数量的商品交换,例如谷物一定量的蒲式耳。然后在对比期货代表一个通用的合同。指定的交货日期的商品金额。
Textbook definitions
教材定义
A long position is where for a forward or futures contract, the trader taking the long position commits to purchasing the commodity on the delivery date. (Bodie, Kane and Marcus ‘Investments’ 8th Edition).
The futures price is the agreed-upon price at maturity. (Bodie, Kane and Marcus ‘Investments’ 8th Edition).
Key difference between futures and forwards is the market where they are traded. Forwards are traded through banks and brokers who negotiate the contracts on behalf of their clients. Futures on the other hand are traded on a Futures exchange.
The use of a margin account and mark-to-market.
保证金账号和调至市价的使用
Futures exchanges act as a clearing house.
Specifically they act as the seller of the contract for the long position and the buyer of the contract with the short position.
In performing this role, the clearing house acts as a guarantee for the performance of each party to the contract.
Because the clearinghouse becomes the counterparty for both traders, if one side of a contract decides to liquidate their position early and this counterparty realizes a profit, then this would mean that the clearinghouse becomes responsible for paying this profit.
For example the futures price agreed was 455.5 cents per bushel for corn and the price has now changed to 457.5 cents per bushel. The trader who was long and hence had the right to buy the corn at 455.5 per bushel has realized a hypothetical profit and could therefore if they wanted reverse their trade and realize this profit.
To resolve this, the clearing house asks for an initial margin which is a good faith deposit from both parties.
Since either party has the ability to realise a loss or profit from the movement in futures price, the clearinghouse asks for an initial margin from both.
Mark-to-market
Problem is this good faith deposit, which represents a percentage of contract value (between 5% and 10% of the total value of the contract), can become depleted with a change in the futures price.
Also a counterparty can liquidate their position, the clearinghouse assumes the hypothetical profit of loss from the change in futures price through mark-to market.
The clearing house takes the profit due to the one counterparty and takes it from the other even if they have not liquidated their position. The means the clearinghouse is able to meet its obligations should a trader decide to liquidate a position. It also means the maturity date of the contract does not govern the realization of a profit or loss.
‘A clearinghouse is established by exchanges to facilitate transfer of securities resulting from trades. For options and futures contracts, the clearinghouse may interpose itself as a middleman between two traders. (Bodie, Kane and Marcus, ‘Investments’ 8th Edition).
It should be pointed out that if a trader accrues sustained losses from daily marking to market, the margin account may fall below a critical value called the maintenance or variation margin. If the value of the account falls below this value, the trader receives a margin call. Positions are closed out before the margin account is exhausted – the trader’s losses are covered, and the clearinghouse is not put at risk.
Convergence property
收敛性质
The convergence of futures prices and spot prices at the maturity of the futures contract. A commodity available from two sources such as the spot or futures market, must be priced identically, or else investors will purchase it from the cheap source in order to sell it in the high-priced market. Therefore, the futures price and the spot price must converge at maturity. This is called the convergence property.
Speculation using futures – Basis risk.
Basis risk is the ‘risk attributable to uncertain movements in the spread between a futures price and a spot price’. (Bodie, Kane and Marcus ‘Investments’ 8th Edition).
Speculators can use futures to profit from their movements.
Speculation using futures – Due to futures mispricing.
Textbook definition:’ the spot-futures parity theorem describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities’. (Bodie, Kane and Marcus, ‘Investments’ 8th Edition).
The riskless return rf = ((F0 + D) – S0) / S0
Where F0 is the future price, D is the dividend and S0 is the stock price.
Rearranging the formula
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