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1、十六AssetValuation:DerivativeInvestments1.A:Introductiona:Definederivativeinstrument,arbitrageopportunity,forwardcontract,futurescontract,option(bothaputandacall),optiononfutures,andswap.Afinancialderivativeisafinancialinstrumentwhosepayoffsdependonanotherfinancialinstr
2、umentorasset.Forexample,anoptiononashareofstockdependsonthevalueoftheunderlyingpriceoftheshare.Thisbookdiscussesfourtypesofderivatives:forwards,futures,options,andswaps.Anarbitrageopportunityisthechancetomakearisklessprofitwithnoinvestment.Inarbitrage,youobservetwoide
3、nticalassetswithdifferentprices.Aforwardcontractisacontractnegotiatedinthepresentthatgivesthecontractholderboththerightandfulllegalobligationtoconductatransactionataspecificfuturetimeinvolvingaspecificquantityandtypeofassetatapredeterminedprice.Afuturescontractisaforw
4、ardcontractthathasbeenhighlystandardizedandcloselyspecified.Aswithaforwardcontract,afuturescontractcallsfortheexchangeofsomegoodatafuturedateforcash,withthepaymentforthegoodtooccuratthefuturedeliverydate.Anoptionscontractgivesitsownertheright,butnotthelegalobligation,
5、toconductatransactioninvolvinganunderlyingassetatapredeterminedfuturedateandatapredeterminedprice(calledtheexerciseorstrikeprice).Options,however,onlygivethelongpositiontherighttodecidewhetherornotthetradewilleventuallytakeplace.Aswapisanagreementbetweentwoormoreparti
6、estoexchangesetsofcashflowsoveraperiodinthefuture.Thepartiesthatagreetotheswapareknownascounterparties.Thecashflowsthatthecounterpartiesmakearegenerallytiedtothevalueofdebtinstrumentsorthevalueofforeigncurrencies.Therefore,thetwobasickindsofswapsareinterestrateswapsan
7、dcurrencyswaps.b:Discusstheno-arbitrageprinciple.Sinceanyobservedpricingerrorswillbeinstantaneouslycorrectedbythefirstpersontoobservethem,anyquotedpricemustbefreeofallknownerrors.Thisisthebasisbehindthetext’sno-arbitrageprinciple,whichstatesthatanyrationalpriceforafin
8、ancialinstrumentmustexcludearbitrageopportunities.Theno-arbitrageopportunityassumptionisthebasicrequirementforrationalprices