Читать книгу Derivatives - Pirie Wendy L. - Страница 17

The instruments just covered encompass all the fundamental instruments that exist in the derivatives world. Yet, the derivatives world is truly much larger than implied by what has been covered here. We have not covered and will touch only lightly on the many hybrid instruments that combine derivatives, fixed-income securities, currencies, equities, and commodities. For example, options can be combined with bonds to form either callable bonds or convertible bonds. Swaps can be combined with options to form swap payments that have upper and lower limits. Options can be combined with futures to obtain options on futures. Options can be created with swaps as the underlying to form swaptions. Some of these instruments will be covered later. For now, you should just recognize that the possibilities are almost endless.

We will not address these hybrids directly, but some are covered elsewhere in the curriculum. The purpose of discussing them here is for you to realize that derivatives create possibilities not otherwise available in their absence. This point will lead to a better understanding of why derivatives exist, a topic we will get to very shortly.

EXAMPLE 5 Forward Commitments versus Contingent Claims

1. Which of the following is not a forward commitment?

A. An agreement to take out a loan at a future date at a specific rate

B. An offer of employment that must be accepted or rejected in two weeks

C. An agreement to lease a piece of machinery for one year with a series of fixed monthly payments

2. Which of the following statements is true about contingent claims?

A. Either party can default to the other.

B. The payoffs are linearly related to the performance of the underlying.

C. The most the long can lose is the amount paid for the contingent claim.

Solution to 1: B is correct. Both A and C are commitments to engage in transactions at future dates. In fact, C is like a swap because the party agrees to make a series of future payments and in return receives temporary use of an asset whose value could vary. B is a contingent claim. The party receiving the employment offer can accept it or reject it if there is a better alternative.

Solution to 2: C is correct. The maximum loss to the long is the premium. The payoffs of contingent claims are not linearly related to the underlying, and only one party, the short, can default.