【期权、期货及其他衍生产品第9版-赫尔】ch07

Chapter 7 Swaps Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 20141 Nature of Swaps A swap is an agreement to exchange cash flows at specified future times according to certain specified rules Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 2014 2 An Example of a “Plain Vanilla” Interest Rate Swap An agreement by Microsoft to receive 6- month LIBOR 8% is paid in dollars. Payments are made annually Principals are $10 million and 1,200 million yen Swap will last for 3 more years Current exchange rate is 110 yen per dollar Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 2014 34 Valuation in Terms of Bonds (Table 7.9, page 173) TimeCash Flows ($)PV ($)Cash flows (yen)PV (yen) 10.80.73116057.65 20.80.66826055.39 30.80.61076053.22 310.07.63381,2001,064.30 Total9.64391,230.55 Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 2014 35 Value of Swap = 1230.55/110 9.6439 = 1.5430 Valuation in Terms of Forwards (Table 7.10, page 174) Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 201436 Time$ cash flow Yen cash flow Forward Exch rate Yen cash flow in $ Net Cash Flow Present value 1-0.8600.0095570.5734-0.2266-0.2071 2-0.8600.0100470.6028-0.1972-0.1647 3-0.8600.0105620.6337-0.1663-0.1269 3-10.012000.01056212.6746+2.67462.0417 Total1.5430 Swaps & Forwards A swap can be regarded as a convenient way of packaging forward contracts Although the swap contract is usually worth close to zero at the outset, each of the underlying forward contracts are not worth zero Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 2014 37 Credit Risk: Single Uncollateralized Transaction with Counterparty A swap is worth zero to a company initially At a future time its value is liable to be either positive or negative The company has credit risk exposure only when ithe value is positive Some swaps are more likely to lead to credit risk exposure than others What is the situation if early forward rates have a positive value? What is the situation when the early forward rates have a negative value? Options, Futures, and Other Derivatives, 9th Edition, Copyright John C. Hull 2014 38 Other Types of Swaps Floating-for-floating interest rate swaps amortizing swaps step up swaps forward swaps constant maturity swaps compounding swaps LIBOR-in-arrears swaps accrual swaps diff swaps cross currency interest rate swaps equity swaps extendable swaps puttable swaps sw