Financial derivatives formerly kap 1-5

basis b=S-F

Suppose continuously compounded interest rate, what is today's spot price (if it's a 9m forward contract)? S=F/e^(r*(m/12))

Forward price formula F=S*e^(r*T)

PV of dividends? PV of div=div/e^(r*(m/12))

forward price when there's dividends? F=(S-PV div)*e^(r*(m/12))

Value of long position f=(F2-F1)*e^(r*(m/12))

What are the rates with continuous compounding? (semi annual) Rc=2*ln(1+(zero/2))

What is the forward rate for the six-month period beginning in 12 months with continuous compounding? f(12,18)=((Rc2*1,5)-(Rc1*1))/(1,5-1)

What is the forward rate for the six-month period beginning in 12 months with semiannual compounding? f(12,18)=2*e^(Rc1*1)+2*e^(Rc2*1,5)+2*e^(Rc3*2)

Value of FRA with fixed and compounded semi annually FRA(12,18)=(principal*(fixed-fsemiannual)*(1,5-1))/e^(Rc2*1,5)

What is the minimum variance hedge ratio? h*=p*(deltaS/deltaF)

What is the optimal number of futures contracts with no tailing of the hedge? no tailing=h**(asset units/future contract units)

What is the optimal number of futures contracts with tailing of the hedge? with tailing=h**(asset units/future contract units)*(S/F)

Klicka