Finanzas

CHAPTER 1 Introduction
Notes for the Instructor
This chapter introduces the markets for futures, forward, and options contracts and explains the activities of hedgers, speculators, and arbitrageurs. Issues concerning futures contracts such as margin requirements, settlement procedures, the role of the clearinghouse, etc are covered in Chapter 2. Some instructors prefer to avoid any mention ofoptions until the material on linear products in Chapters 1 to 7 has been covered. I like to introduce students to options in the first class, even though they are not mentioned again for several classes. This is because most students find options to be the most interesting of the derivatives covered and I like students to be enthusiastic about the course early on. The way in which the material inChapter 1 is covered is likely to depend on the backgrounds of the students. If a course in investments is a prerequisite, Chapter 1 can be regarded as a review of material already familiar to the students and can be covered fairly quickly. If an investments course is not a prerequisite, more time may be required. Increasingly some aspects of derivatives markets are being covered in introductorycorp 0--rate finance courses, accounting courses, strategy courses, etc. In many instances students are, therefore, likely to have had some exposure to the material in Chapter L I do not require an investments elective as a prerequisite for my elective on futures and options markets and find that 1 ~ to 2 hours is necessary for me to introduce the course and cover the material in Chapter 1. Tomotivate students at the outset of the course, I discuss the growing importance of derivatives, how much well experts in the field are paid, etc. It is not uncommon for students who join derivatives groups, and are successful, to earn (including bonus) several hundred thousand dollars a year~or even $1 million per year~three or four years after graduating . Towards the end of the first class I usuallyproduce a current newspaper and de-scribe several traded futures and options. I then ask students to guess the quoted price . Sometimes votes are taken. This is an enjoyable exercise and forces students to think actively about the nature of the contracts and the determinants of price. It usually leads to a preliminary discussion of such issues as the relationship between a futures price and thecorresponding spot price, the desirability of options being exercised early, why most options sell for more than their intrinsic value, etc. While covering the Chapter 1 material, I treat futures as the same as forwards for the purposes of discussion. I try to avoid being drawn into a discussion of such issues as the mechanics of futures, margin requirements, daily settlement procedures, and so onuntil I am ready. These topics are covered in Chapter 2. As will be evident from the slides that go with this chapter, I usually introduce students to a little of the Chapter 5 material during the first class. I discuss how arbitrage
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arguments tie the futures price of gold to its spot price and why the futures price of a consumption commodity such as oil is not tied to its spot price in thesame way. Problem 1.26 can be used to initiate the discussion. I find that Problems 1.27 and 1.31 work well as an assignment questions. (1.31 has the advantage that it introduces students to DerivaGem early in the course.) Problem 1.28 usually generates a lively discussion., I sometimes ask students to consider it between the first and second class. We then discuss it at the beginning of thesecond class. Problems 1.29, 1.30, and 1.32 can be used either as assignment question or for class discussion.

QUESTIONS AND PROBLEMS
Problem 1.1.

What is the difference between a long forward position and a short forward position?
When a trader enters into a long forward contract, she is agreeing to buy the underlying asset for a certain price at a certain time in the future. When a trader...