《国际货币与金融经济学》05

Chapter5:InterestYields,InterestRateRisk,andDerivativeSecuritiesChapterOverviewChapter5beginswithapresentationoftheconceptofdiscountedpresentvalueandhowitrelatesthemarketpriceofabondtoitsyield. Thisdiscussionisfollowedbyanexplanationofhowtermtomaturityaffectsinterest-raterisk.Thenextsectionintroducesthetermstructureofinterestratesandtherepresentationtheyieldcurve. Thissectionproceedswithadiscussionofvarioustheoriesofthetestructureandwithanevaluationoftheextenttowhichtheyareabletoexplainregulafeaturesoftheyieldcurve,suchasitsupwardslope. Thetheoriesdiscussedare(1)segmentedmarketstheory,(2)theexpectationstheoryand(3)thepreferredhabitattheFinally,thesectionendswithanelaborationofthevarioussourcesofinterestrateandotherreasonsforinterestratedifferentialsbetweeninstrumentswithsimilarmaturities. Theseinclude(1)differencesinthedegreeofdefaultrisk,(2)differencthedegreeofliquidityand(3)differencesintaxobligations.Thefollowingsectionexamineshowexcessreturnsarisingfromfailureofuncoveredinterestparitycontributetodifferencesamongnationalinterestrates. Itexplainstconceptofexcessreturns,discussesrecentevidenceconcerningexcessreturnsforvarinations,andevaluateshowvaryingsizesofexcessreturnscanhelpexplaininternationinterestratedifferentials.Thenextsectiondefinesrealinterestrates. Itexplainshowcombiningthepurchasingpowerparityanduncoveredinterestparityconditionsleadstoarealinterestparitycondition,whichinprinciplecanbeusedtoprovideameasureofinternationalmarketarbitrage.Thechapterthenturnstoadiscussionofwaysinwhichinvestorscanhedgeagainstinterestrateriskusingderivatives. Thesectionpointsoutthatforwardexchangecontractsaresimplyoneexampleofaderivativesecurity. Justasinvestorsuseforwaexchangeratemarketstohedgeagainstexchangerisk,investorscanusederivativesecuritiesthatarebasedonforwardinterestratestohedgeagainstinterestrateriskchapterthendescribessomeofthemostcommonformsofavailablederivatives,suchasinterestratefutures,stockindexfutures,andcurrencyfutures. Theusesofcurrencyfutures,optionsandswapsarealsodiscussed. Thechapterendswithabriefdiscussiothetypesofrisksassociatedwithderivatives.ChapterOutlineInterestRatesInstrumentYieldsandFinancialInstrumentPricesInterestRatesandDiscountedPresentValueDiscountedPresentValueandtheMarketPriceofBondsPerpetuitiesandtheRelationshipbetweenInterestYieldsandBondPricesTermtoMaturityandInterest-RateRiskTermStructureofInterestRatesYieldCurvesSegmentedMarketsTheoryTheExpectationsTheoryThePreferredHabitatTheoryRiskStructureofInterestRatesDefaultRiskLiquidityTaxDifferencesInterestRateDifferentials—ExcessReturnsandFailureofUncoveredParityBreakdownsofUncoveredInterestParityandExcessReturnsExcessReturnsEvidenceonExcessReturnsAccountingforDifferencesinExcessReturnstoHelpExplainInterestDifferencesRealInterestRatesandRealInterestParityRealInterestRates:TheFisher2.RealInterestParityCombiningRelativeInterestParityandUncoveredInterestParityDeviationsfromRealInterestParityasaMeasureofInternationalArbitrageHedging,Speculation,andDerivativeSecuritiesPossibleResponsestoInterestRateRiskSomeStrategiesforLimitingInterestRateRiskHedgingDerivativeSecuritiesHedgingwithForwardContractsSpeculationwithDerivativesSpeculativeGainsandLossesCommonDerivativeSecuritiesandTheirRisksForwardContractsFuturesInterest-RateFuturesStock-IndexFuturesCurrencyFuturesHedgingwithCurrencyFuturesDailyFuturesSettlementOptionsStockOptionsandFuturesOptionsCurrencyOptionsLimitedLossesandPotentialProfitsfromUsingCurrencyOptionsLimitedLossesandPotentialProfitsfromUsingCurrencyPutOptionsNettingSwapsCurrencySwapsTypesofSwapsDerivativesRisksandRegulationMeasuringDerivativesRisksTypesofDerivativesRisksChapterSummaryFundamentalIssuesHowareinterestyields,financialinstrumentprices,andinterest-rateinterrelated?Whydomarketinterestyieldsvarywithdifferencesinfinancialinstruments'tomaturityandrisks?Whatfactorsexplainwhyinternationalinterestratedifferentialsareinconsistentwiththeuncoveredinterestparitycondition?Whatarerealinterestrates,andhowcanrealinterestratedifferentialsserveindicatorsoftheextenttowhichinternationalmarketsareopentoarbitrage?Whatarederivativesecurities?Whatarethemostcommonlytradedderivativesecurities?ChapterFeaturesManagementNotebook:"WhyUncoveredInterestParityMayHold,ButNotforLong"Thismanagementnotebookconsidersonetheoryforwhyuncoveredinterestparityrarelyappearstohold,whichisthatthetimeimmediatelybeforeinterestreturnsareabouttobereceivedbyholdersoffinancialinstrumentsiswhenthegreatestarbitrageopportunityexists.ItdiscussesrecentresearchbytwoFederalReserveeconomistsindicatingthattheuncoveredinterestparityconditionindeedappearsmorelikelytobesatisfiedduringthelastfewminutesbeforeinstrumentsmature.ForCriticalAnalysis:Theinterestrateonthisfinancialinstrumentandtheinterestasimilarforeigninstrumentcannotchangeduringthistimejustbeforetransmissionofinterestpaymentstotheholdersoftheseinstruments. Exchangeratescanstilladjustforeignexchangemarkets,however.ManagementNotebook:"BadDaysThesubjectofthismanagementnotebookisatraditionalmethodusedinIndianfinanciamarketstocarryforwardtradesofcommodities,stocks,orcurrencieswithoutengagingfinalsettlement. ItdiscussesthefactthatrecentlyintroducedWestern-stylefuturescontractsappeartobegraduallyreplacingthisinformaltypeoffuturesmechanism.ForCriticalAnalysis:Traderstendtopreferlowerprices(andhencehigherreturns)balsoareaversetorisk.IfWestern-stylefuturescontractsaresufficientlylessriskcanhelpexplainwhytheyhavetendedtowhenthelatterinstrumentstradeatlowerprices.ManagementNotebook:"FollowingtheMoneyinDerivativesMarkets"Thismanagementnotebookprovidescomparativedataonderivativestradedinorganizedexchangesandinover-the-counter(OTC)markets.Itprovidesinformationaboutwhichtypesofderivativesaremostcommonlyused.ForCriticalAnalysis:Thethreekeyfactorsarelikelytobethepriceofthederivatsecurity,therisksassociatedwithitsuse,andthetransactionscostsentailedinpurthederivativeandmanagingtheinstrumentoverthelifeofthecontract.AnswerstoEndofChapterQuestions1. Giventhat=C/(1+R)+C/(1R+C/(1+)+C/(1++...;Bmultiplyeachsideby(1+R1R)=C+C/(1+R)+C/(+...;Bandsubtractfromeachside:1+R)-=[C+C/(1+R)+C/(+...]-B B B[C/(1+R)+C/(1+2+...];Simplifying:P*R=C.BTherefore,P=C/R.B Inthissituation,annualyieldsdeclineasthetermtomaturityincreases,whichthattheyieldcurveslopesdownward. Accordingtotheexpectationstheoryofthetermstructureofinterestrates,this situationarisesbecausebond-markettradersanticipatesthatshort-terminterestrateswillfallsharply. Thus,anaverageofandfutureshort-termrates,which,whenaddedtoanytermpremiumapplicabletoalongermaturity,islowerthanthecurrentshort-termrate. Yes,theexcessreturnontheGermangovernmentbondpercentpercent)=1.5percent.ParityConditions:Usinguncoveredinterestparity,R-R*=(S+1e-S)/S.Becausetheleft-hand-sideisnegative,wewouldexpecttheright-handsidetobenegative,indicatingdomesticcurrencyappreciation.UsingrelativePPP,-*=%S.Becausetheleft-hand-sideisnegative,wewouldexpecttheright-handsidetobenegative,indicatingadomesticappreciation.Thedomesticrealinterestrateis5percentless2percent,or3percent.Theforeignrealinterestrateis6percentless4percent,or2percent.Realinterestratesarenotequal,sotherealinterestparityconditiondoesnothold.Wewouldexpectfundstoflowintothedomesticcountryandoutoftheforeigncountry,whichwoulddrivedomesticrealinterestratedownandtheforeignrealinterestrateup.Incontrasttoforwardcurrencycontracts,currencyfuturesrequiredeliveryofstandardquantitiesofcurrencies.Inaddition,holdersofcurrencyfuturesexperienceprofitsoflossesonthecontractsduringtheentireperiodbeforethecontractsexpire,whereasprofitsorlossesoccuronlyattheexpirationdateofaforwardcurrencycontract.Acurrencyfuturealreadyisaderivative,becauseitsvaluevarieswiththeexchangerate.Thevalueofacurrencyfuturesoption,inturn,dependsontheunderlyingofacurrencyfuturescontract,soitsvalueisderivedfromthefuturesderivative.Inthisway,acurrencyfuturesoptionisa"derivativeofaderivative."a. Thecompanyowes500,000SfrandisconcernedaboutthefuturespotexchangevalueoftheU.S.dollar-Swissfranc.Itcanthereforepurchasefuturecontractssetalimittoitspotentialexchangeratelosses.TheSfrispurchasedin125,000francincrements.Therefore,thefirmwouldwanttopurchase500,000/125,000=4futurescontracts.Giventheinitialonafranccontract,thetotalinitialmarginthefirmestablishesis:4($1,688)=$6,752.Thedailymarginchangesareasfollows:First:(0.6252-0.6251)(125,000)(4)=+$50.Thereforeitsmarginequals$6,802.Second:(0.6127-0.6252)(125,000)(4)=-$6250.Thereforethemarginwouldfallto$552.However,themaintenancemarginisequalto$1,250.Thus,themarginwillequal$1,250.Third:(0.6115-0.6127)(125,000)(4)=-$600.Again,themarginmustremainat$1,250.Fourth:(0.6806-0.6115)(125,000)(4)=-$1450.Again,thisdailychangewouldfallbeneaththemaintenancemargin.Thus,itremainsat$1,250.AsthedollarcontinuestoappreciaterelativetotheSwissfranc,thevalueofthefuturescontractfalls.However,thecostof500,000francpaymentischeaperontermsoftheU.S.dollar.a.Thecalloptioniscurrentlyoutofthemoney.NetProfitNet

b.(0.0188)(62,500)=$1,17510,6000.96010,6000.9600.9800.99881.020BreakEven9,400OutofthemoneyInthemoneyAtthemoneyAtS=$0.96/€theoptionisnotexercisedandthefirmisout$9,400AtS=$1.02/€theoptionisexercised.Thefirmearns$10,600AtS=$0.9657/€,thefirmdoesnotexercisetheoptionandisout$9,400Breakeven:$0.9988/€SeeDiagramgiveninpart(b).Theprosandconsofforwardcontractsandswapsliewithinhoweachworks.Aforwardcontractcanbearrangedbetweenapurchaserandaseller,andisdependentuponeachparticipant'sbeliefsofwhatwillhappeninthefuture.Sometimesitcandifficulttomatchcounterpartiestosuchcontracts.Swaps,ontheotherhand,directlymatchtraderswhorequireflowsofcurrenciesheldbyoneanother.Swapsmayalsoallowborrowerstoreceivebetterloanratesbyissuingdebtintheirhomecurrencyratherthaninaforeigncurrency;therebypotentiallyavoidingariskpremium.Considerationsofthereasonforthelongpositiononacurrencyandwhichcurrencyisatissuewillinfluencethedecisionofwhichderivativetouse.MultipleChoiceQuestionsTheamountofcreditextendedviathepurchaseofafinancialinstrumentistheprincipal.frontload.sumofthecoupons.presentdiscountedvalue.Answer:ATocalculatethepriceofafinancialinstrument,onemustfindthepresentdiscountedvalueofthestreamofcouponpaymentsandprincipal.principalplusthepresentdiscountedvalueofthecoupons.sumofthecouponsdividedbytheprincipal.sumofthecouponsplustheprincipal.Answer:AAbondwithnofixedmaturitydateiscalledadiscountbond.callablebond.treasurybill.perpetuity.Answer:DAbondwithaninfinitepaymentlifewillhaveapriceequaltothepresentdiscountedvalueofitsprincipal.equaltothecouponamountdividedbytheinterestrate.equaltothecouponamountdividedbyoneplustheinterestrate.thatisarbitrarilyhigh,asitwillproducecouponpaymentsforever.Answer:BSupposethepriceofaperpetuityis$1,000andthattheperpetuitypaysacouponof$60peryear.Theinterestrateonthisbondis0.06percent.0.60percent.6percent.60percent.Answer:C Supposetheinterestrateonaperpetuityis5percent,anditspriceis$1,500.annualcouponmustthereforeequalA.$75.B.$300.C.$750.D.$30,000.Answer:ASupposeaperpetuitypays$100peryearanditsinterestrateis8%.ItspriceistoA.$80.B.$125.C.$800.D.$1,250.Answer:DZerocouponbondshavethedistinguishingfeaturethattheyhaveanindefinitelife.payalumpsumatmaturity.areissuedonlybytheTreasury.payonlycouponsthatcarryaninterestrateequaltotherealinterestrate.Answer:BInterest-rateriskarisesbecauseshortertermstomaturityexposebondstogreaterriskofcapitallosswhenratesrise.shortertermstomaturityexposebondstogreaterriskofcapitallosswhenratesfall.longertermstomaturityexposebondstogreaterriskofcapitallosswhenratesrise.longertermstomaturityexposebondstogreaterriskofcapitallosswhenratesfall.Answer:CTheyieldcurvedisplaystherelationshipamongyieldsonbondsthatdifferonlytheircountryoforigin.termstomaturity.bondrating.defaultrisk.Answer:BThesegmentedmarketstheoryisgroundedintheassumptionthatinflationwillbeprevalentinonlycertainlong-termbonds.investorshaveidenticalpreferencesforallbondmaturities.bondswithdifferentmaturitiesarenonsubstitutable.domesticinvestorspreferdomesticbonds.Answer:CAninvestorusingtheexpectationstheorywouldbuyatwo-yearbondatthetimeonlyifitsyieldisgreaterthanorequaltotheaverageoftheone-yearspotrateandtheexpectedrateayearlater.lessthantheaverageoftheone-yearspotrateandtheexpectedspotratealater.greaterthanorequaltotheexpectedspotrateayearlater.greaterthanorequaltotheone-yearspotrate.Answer:AThepreferredhabitattheorysuggeststhatinvestorshaveapreferencefordomesticoverforeignbonds.willonlyselectbondsoverasmallrangeoftermstomaturity. haveapreferredmaturitylengthbutarewillingtomoveawayfromthisifinterestratedifferentialishighenough.prefer,allelsebeingequal,toholdthebondsissuedbyaparticulargroupfirmsinaregionoftheworldwithashallowyieldcurve.Answer:CBecauseofthepossibilityofdefaultandlowliquidity,somebondscarrynopremium.ariskpremium.amarginaccount.alowerinterestrate.Answer:BTheprimaryreasonthatmunicipalbondsearnalowerinterestratethanbondsisthatmunicipalbondshavelessrisk.treasurybondsareingreatersupply.municipalbondsareoftenserialtypebonds.theinterestearnedonmunicipalbondsistax-exempt.Answer:DReinvestmentriskarisesfromasituationinwhichlong-terminstrumentspreventinvestorsfromactingtotakeadvantageincreasesininterestrates.aninvestorcannotbeguaranteedthesameinterestratewhenrollingoverterminstruments.theinvestorsuffersfromaninabilitytoliquidateshort-terminstrumentsopportunetimes.aninstrumentcannotbetransferredbackintothedomesticcurrencyimmediately.Answer:BTherealinterestrateisdefinedasthenominalinterestrateplustheexpectedrateofpriceinflation.expectedrateofpriceinflationminusthenominalinterestrate.nominalinterestrateminustheexpectedrateofpriceinflation.nominalinterestratedividedbytheexpectedrateofpriceinflation.Answer:CUsingtheexpressionforpurchasingpowerparity,wecanshowthatthedifferenceexpectedratesofinflationbetweencountriesisequaltothefuturespotratesonthecurrencyexchangemarket.sumofnominalinterestrateplusexpectedinflation.sumofthenominalinterestratesinthetwocountries.expectedrateofdeprecationorappreciationofthedomesticcurrency.Answer:DDeviationsfromrealinterestparitycanbedecomposedintodeviationsfromabsolutepurchasingpowerparityandrelativepurchasingpowerparity.relativepurchasingpowerparityanduncoveredinterestrateparity.coveredinterestparityandrelativepurchasingpowerparity.coveredanduncoveredinterestparity.Answer:BAswapisacontractbetweenpartiesinwhichthepartiesexchangeflowsofpayments.agreetothefuturepriceofacurrencyexchange.exchangefuturecashflowsforpastcashflows.havetherighttobuyanunder