Đề thi môn chứng khoán phái sinh trường ĐH kinh tế - Luật sử dụng các mô hình Black scholes model, Binomial options pricing model, excel, ngôn ngữ lập trình R. Bài viết có nội dung về chứng khoán phái sinh các sản phẩm covered warrant, future contract là tài liệu tham khảo hữu ích cho những người đang quan tâm đến lĩnh vực chứng khoán phái sinh và các bạn sinh viên đang có nhu cầu tìm tài liệu ôn tập cuối kỳ.
DERIVATIVES PART 1: DERIVATIVES AND CORPORATE RISK MANAGEMENT Case study: Assume that you have just been hired as a financial analyst by Tropical Sweets Inc., a midsized California Company that specializes in creating exotic candies from tropical fruits such as mangoes, papayas, and dates The firm's CEO, George Yamaguchi, recently returned from an industry corporate executive Conference in San Francisco One of the sessions he attended was on the pressing need for smaller companies to institute corporate risk management programs As no one at Tropical Sweets is familiar with the basics of derivatives and corporate risk management, Yamaguchi has asked you to prepare a brief report that the firm's executives can use to gain at least a cursory understanding of the topics To begin, you gather some outside materials on derivatives and corporate risk management and use those materials to draft a list of pertinent questions that need to be answered In fact, one possible approach to the paper is to use a question and answer format Now that the questions have been drafted, you must develop the answers Why might stockholders be indifferent to whether a firm reduces the volatility of its cash flows? Answer: When stockholders diversifying their portfolios, they can eliminate the risk of volatile cash flows (If volatility in cash flows is not caused by systematic risk) Thus they are indifferent as to who does the hedging What are seven reasons risk management might increase the value of corporation Answer: - The firms can maintain their optimal capital budget - Reduce both the risks and costs of borrowing by using swaps - Avoid financial distress costs - Hedging certain types of risk because managers have a comparative advantage other - Hedging relative to the hedging ability of individual investors - Reduces the higher taxes that result from fluctuating earnings - Reduced volatility reduces bankruptcy risk, which enables the firm to increase its debt capacity What is an option? What is the single most important characteristic of an option? Answer: - A financial option is a contract which gives its holder the right to buy (or sell) anasset at a predetermined price within a specified period of time - An option’s mostimportant characteristic is that it does not obligate its owner to take any action; itmerely gives the owner the right to buy or sell an asset Option Terminology Answer: - Call option: Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period - Put option: A put option is a contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a predetermined price within a specified time frame - Exercise price or strike price: The strike price is defined as the price at which the holder of an options can buy (in the case of a call option) or sell (in the case of a put option) the underlying security when the option is exercised Hence, strike price is also known as exercise price - Option price: Option contract’s market price - Expiration date: The date the option matures - Exercise value: The exercise value is the value that an option buyer will get from the option on exercising it - Covered option: an option written against stock held in an investor’s portfolio - Naked (uncovered) option: An option written without the stock to back it up - In-the-money call: An in the money call option means the option holder has the opportunity to buy the security below its current market price - Out-of-the-money call: A call option whose exercise price exceeds the current stock price - LEAPS: Similar to normal options, but they are longer-term options with maturities of up to 2½ years Consider Tropical Sweets’s call option with a $25 strike price The following table contains historical values for this option at different stock prices: Stock Price 5.1 Call Option Price $25.00 $3.00 30.00 7.50 35.00 12.00 40.00 16.50 45.00 21.00 50.00 25.50 Create a table that shows the (a) Stock price, (b) Strike price, (c) Exercise value, (d) Option price, and (e) Premium of option price over exercise value Answer: Exercise value = Stock price - Strike price Premium = Option price - Exercise value Stock price (a) Exercise value (a) - (b) = (c) Option price (d) Premium (d) - (c) = (e) $25.00 $00.00 $03.00 $03.00 $30.00 $05.00 $07.50 $02.50 $10.00 $12.00 $02.00 $40.00 $15.00 $16.50 $01.50 $45.00 $20.00 $21.00 $01.00 $50.00 $25.00 $25.50 $00.50 $35.00 5.2 Strike price (b) $25.00 What happens to the premium of option price over exercise value as the stock price rises? Why? Answer: When the stock price increases the premium of the option price over the exercise value declines Because of leveraged finance is declining In 1973, Fischer Black and Myron Scholes developed the Black-Scholes Option Pricing Model (OPM) 6.1 What assumptions underlie this model? Answer: - Buy, sell, and short any quantities or percentages - No corresponding fees or costs - No dividends - European option - No arbitrage - Price evolution follows Weiner process (geometric random walk) with constant drift and variance 6.2 - Borrow and lend at the risk-free rate - No transaction costs (e.g., market impact is not incurred during trading) Write the three equations that constitute the model Answer: The OPM consists of the following three equations: V = P[N(d1) d1 = Xe rRF t [N(d2)] ln( P/X) [rRF ( /2)]t t d2 = d1 - t V = Current value of a call option with time t until expiration P = Current price of the underlying stock N(di) = Probability that a deviation less than di will occur in a standard normal distribution e 2.7183 ln(P/X) = Natural logarithm of P/X t = Time until the option expires (the option period) rRF = Risk-free interest rate = Standard deviation of the rate of return on the stock X = Strike price of the option 6.3 What is the value of the following call option according to the OPM? Stock price = $27.00 Exercise price = $25.00 Time to expiration = months Risk-free rate = 6.0% Stock return variance = 0.11 Answer: P $27.00 X $25.00 kRF 6.0%; t 0.5 years 2 d1 = 0.11 ln($ 27 /$25) [(0.06 0.11/2)](0 5) 0.5736 (0.3317 )(0.7071) d2 = d1 - (0.3317)(0.7071) = 0.3391 N(d1) = N(0.5736) = 0.7168 N(d2) = N(0.3391) = 0.6327 V = P[N(d1) - Xe rRF t [N(d2)] V = 27(0.7168) - 25e-0.03(0.6327) = 4.00$ Disregard the information in parf f Determine the value of a firm's call option using the binomial approach by creating a riskless hedge given the following information A firms current stock price is $15 per share Options exist that permit the holder to buy one share of the firms stock at an exercise price of $15 These options expire in months, at which time the firms stock will be selling at one of two prices, $10 or $20 The risk-free rate is 6% What is the value of this firms call option? Answer: Ending Stock price Strike price Call option value $10 $15 $0 $20 $15 $5 $10 - $5 Calculate the value of the portfolio at the end of months Value of portfolio = Ending Stock price * 0.5 + Ending option value When investor sells at $10 Value of portfolio = $10 *0.5 + = $5 When investor sells at $20 Value of portfolio = $20 * 0.5 - $5 = $5 - The present value of the riskless portfolio today PV = Cost of stock in portfolio = = $4.86 = % of stock in portfolio x Stock price = 0.5 * $15 = $7.5 Price of option = Cost of stock - PV of portfolio = $7.5 – $4.86 =$2.64 What effect does each of the following call option parameters have on the value of a call option? Answer: - Current stock price: The value of a call option increases (decreases) as the current stock price increases (decreases) - Exercise price: As the strike price of the option increases (decreases), the value of the option decreases (increases) - Length of the option period: As the expiration date of the option is lengthened, the value of the option increases - Risk-free rate: As the risk-free rate increases, the value of the option tends to increase as well - Variability of the stock price: The greater the variance in the underlying stock price, the greater the possibility that the stock's price will exceed the strike price of the option What are the differences between forward and futures contracts? Answer: FORWARD CONTRACT FUTURES CONTRACT Meaning Forward Contract is an agreement between parties to buy and sell the underlying asset at a specified date and agreed rate in future A contract in which the parties agree to exchange the asset for cash at a fixed price and at a future specified date, is known as future contract Traded on Over the counter, i.e there is no secondary market Organized stock exchange No such probability Default As they are private agreement, the chances of default are relatively high What is it? It is a tailor made contract It is a standardized contract Risk High Low Collateral Not required Initial margin required Maturity As per the terms of contract Predetermined date Regulation Self regulated By stock exchange 10 Explain briefly how swaps work Answer: A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything 11 Exlplain briefly how a firm can use futures and swaps to hedge risks Answer: - Swaps: If the current exchange rate changes in an unfavorable direction for the company, the company will suffer losses This exchange rate risk can be eliminated by at the beginning, the company establishes a series of forward rate contracts with terms that coincide with the interest and principal payment dates - Futures: When a company knows that it will be making a purchase in the future for a particular item, it should take a long position in a futures contract to hedge its position If a company knows that it will be selling a certain item, it should take a short position in a futures contract to hedge its position 12 What is corporate risk management? Why is it important to all firms? Answer: Corporate risk management refers to all of the methods that a company uses to minimize financial losses Risk managers, executives, line managers and middle managers, as well as all employees, perform practices to prevent loss exposure through internal controls of people and technologies Risk management is important in an organisation because without it, a firm cannot possibly define its objectives for the future If a company defines objectives without taking the risks into consideration, chances are that they will lose direction once any of these risks hit home PART 2: SHOW YOUR UNDERSTANDING OF FUTURE AND COVERED WARRANTS IN VIETNAM FUTURE CONTRACT What is a futures contract? A futures contract is an agreement between two parties to buy or sell an asset at a specified day in future and at a predetermined price At the time when the agreement is established, the purchasers and sellers of the futures contract will know: - What type of assets / goods, or basic assets, that they will buy / sell; - Volume and quality of assets that the seller will transfer and the buyer will receive; - The time when the underlying assets are purchased/sold or the time of contractual payment between the parties; - The price that the buyer and seller will apply to pay for the underlying asset Stock Index futures contract Stock Index futures is a type of futures contract where the underlying asset is a stock index Similar to other types of futures, stock index futures are instruments that are traded on a centralized exchange with standardized terms Those standardized factors are basically detailed in the contract characterization No Contents 01 Contract name VN30 index future Trading sessions Opening periodical order-matching session, continuous order-matching session and closing periodical ordermatching session Trading time - Moring session: + Opening periodical order-matching session: 8h45 – 9h00 + Continuous order-matching session: 9h00 – 11h30 - Breaking: 11h30 – 13h00 - Afternoon session: 02 03 Descriptions - Before placing a trading order, during the period of holding a position, and when implementing a contract, the investor must maintain the level of the escrow deposit required by the clearing member - Trading orders of the investor are matched on the trading system of an SE After the orders have been matched, the investor is deemed to have participated in a derivatives contract and has all rights and is solely liable to perform the obligations arising from such contract; - The investor must ensure that the position on the trading account falls within the position limit in accordance with regulations of the VSD Market size Target Unit 2017 (AugDec) Contract 1.106.353 2018 2019(JanJul) Total trading volume Average trading volume Contract /session 10.954 78.791 104.284 OI volume 8.077 21.653 21.653 Contract 19.697.764 15.245.004 12 COVERED WARRANTS What is covered warrants? A covered warrant is a secured asset issued by a securities company that gives the holder the right to buy or sell an underlying asset at a specified price on or before a specified date Conditions for listed shares to be underlying securities for securities - They belong to the VN30 or HNX30 index or an equivalent replacement index - The average daily capitalization value in the last six (6) months calculated up to data pegging date is VND 5,000 billion or more - Having been listed for six (6) months or more calculated up to the date of consideration - The business operational results of the issuer of the underlying securities are profitable and without any accumulated losses, calculated on the basis of the financial statements at the most recent time compared to the date of consideration - The total volume of transactions in the last months calculated up to data pegging date is a minimum 25% of the average quantity of freely transferable shares in the last months - The ratio of freely transferable shares as at data pegging date is 20% or higher - Not currently subject to a warning, under control or special control, temporary suspension of trading nor in the delisting category pursuant to Rules of the SE Type of warrant - Call option: The right to buy the underlying securities in futures - Put option: The right to sell the underlying securities in futures 13 Trading regulation Regulation on Covered Warrant Trading on the Hochiminh Stock Exchange ATO, LO, MP, ATC Applicable orders Last trading date The last trading date comes two days before the expiry date of covered warrant Trading time - Opening periodical order matching : 09:00 – 09:15 - Morning continuous order matching : 09:15 – 11:30 - Afternoon continuous order matching :13:00 –14:30 - Closing periodical order matching :14:30 – 14:45 - Put-through :09:00 – 15:00 Settlement price The price calculated and announced by HOSE on the expiry date of warrant Warrant type Underlying asset Issuing organization Multiplier Tick size Trading method Expiry date Settlement method Call warrant Stock Securities company 10 CW 10 VND for all price steps Order-matching and put-through The last day the warrant holder can exercise the right Settled in cash Leverage of covered warrants CW has high leverage, can be up to 7-10 times, with a life cycle of 3-24 months Securities companies will issue the price of CW lower than the stock price, meaning that the investment capital is lower so investors have a chance to get higher profits Moneyness of covered warrants - In-the-money (ITM) is a call warrant whose exercise price (exercise index) is lower than the market price (index) of the underlying securities or a put warrant whose exercise price (exercise index) is higher than the price (index) of the underlying securities 14 - Out-of-the-money (OTM) is a call warrant whose exercise price (exercise index) is higher than the market price (index) of the underlying securities or a put warrant whose exercise price (exercise index) is lower than the price (index) of the underlying securities - At-the-money (ATM) is a call warrant whose exercise price (exercise index) is equal to the market price (index) of the underlying securities or a put warrant whose exercise price (exercise index) is equal to the price (index) of the underlying securities MONEYNESS OF COVERED WARRANTS In the money – ITM At the money –ATM Out of the money – OTM CALL CW: S>X PUT CW: S