Options, Futures, and Other Derivatives 6th

Transcript:Options, Futures, and Other Derivatives 6th:
Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.1 Interest Rate Futures Chapter 6 Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.2 Day Count Conventions in the U.S. (Page 129) The interest earned between two dates is: Number of days between dates x Interest earned in reference period Number of dates in reference period Example: Coupon dates are March 1 and September 1. We wish to calculate the interest between March 1 and July 3, with coupon 8% Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.3 Treasury Bond Price Quotes in the U.S Cash price = Quoted price + Accrued Interest since last coupon date Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.4 Example Consider an 11% coupon bond maturing on July 10, 2012 with a price today (March 5, 2007) $95.50. The most recent coupon date is January 10 The number of days between January 10 and March 5 is 54, while between January 10 and July 10 is 181 The accrued interest is (54/181)*$5.5=$1.64 The cash price per $100 face value is $97.14 Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.5 Treasury Bond Futures Pages 133-137 The delivery is any government bond with more than 15 years to maturity, which is not callable within 15 years Cash price received by party with short position = Most Recent Settlement Price × Conversion factor + Accrued interest Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.6 Example Settlement price of bond delivered = 90.00 Conversion factor = 1.3800 Accrued interest on bond =3.00 Price received for bond is (1.3800×90.00)+3.00 = $127.20 per $100 of principal The party with the short position in one contract would deliver bonds with a face value of $100.000 and receive $127.20. Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.7 Conversion Factor The conversion factor for a bond is approximately equal to the value of the bond on the assumption that the yield curve is flat at 6% with semiannual compounding Options, Futures, and Other Derivatives 6th Edition, Copyright © John C. Hull 2005 6.8 Example Consider an 10% coupon bond with 20 years Coupon payments are assumed to be made every 6 months The face