59Lecture10 Managing Risk(高级金融管理-厦门大学 傅元略)

CenterforAccountingStudiesofXiamenUniversity2007Lecture10AdvancedFinancialManagementManagingRiskCh27XiamenUniversity–AdvancedFinancialManagementFU-2Sub-topicsCovered•WhyManageRisk•Insurance•ForwardandFuturesContracts•SWAPS•HowtoSetUpAHedge•Is“Derivative”aFourLetterWordXiamenUniversity–AdvancedFinancialManagementFU-31.RiskReduction•Whyriskreductiondoesnotaddvalue1.Hedgingisazerosumgame2.Investors’do-it-yourselfalternativeXiamenUniversity–AdvancedFinancialManagementFU-41.RiskReduction•Riskstoabusiness•Cashshortfalls•Financialdistress•Agencycosts•Variablecosts•Currencyfluctuations•Politicalinstability•WeatherchangesXiamenUniversity–AdvancedFinancialManagementFU-52.Insurance•Mostbusinessesfacethepossibilityofahazardthatcanbankruptthecompanyinaninstant.•Theserisksareneitherfinancialorbusinessandcannotbediversified.•Thecostandriskofalossduetoahazard,however,canbesharedbyotherswhosharethesamerisk.XiamenUniversity–AdvancedFinancialManagementFU-62.InsuranceExampleAnoffshoreoilplatformisvaluedat$1billion.Expertmeteorologistreportsindicatethata1in10,000chanceexiststhattheplatformmaybedestroyedbyastormoverthecourseofthenextyear.Howcanthecostofthishazardbeshared?XiamenUniversity–AdvancedFinancialManagementFU-72.InsuranceExample-contAnoffshoreoilplatformisvaluedat$1billion.Expertmeteorologistreportsindicatethata1in10,000chanceexiststhattheplatformmaybedestroyedbyastormoverthecourseofthenextyear.?HowcanthecostofthishazardbesharedAnswerAlargenumberofcompanieswithsimilarriskscaneachcontributepayintoafundthatissetasidetopaythecostshouldamemberofthisrisksharinggroupexperiencethe1in10,000loss.Theother9,999firmsmaynotexperiencealoss,butalsoavoidedtheriskofnotbeingcompensatedshouldalosshaveoccurred.XiamenUniversity–AdvancedFinancialManagementFU-82.InsuranceExample-contAnoffshoreoilplatformisvaluedat$1billion.Expertmeteorologistreportsindicatethata1in10,000chanceexiststhattheplatformmaybedestroyedbyastormoverthecourseofthenextyear.?Whatwouldthecosttoeachgroupmemberbeforthisprotection.Answer000,100$000,10000,000,000,1=XiamenUniversity–AdvancedFinancialManagementFU-92.Insurance•Whywouldaninsurancecompanynotofferapolicyonthisoilplatformfor$100,000?•Administrativecosts•Adverseselection•MoralhazardXiamenUniversity–AdvancedFinancialManagementFU-102.Insurance•Thelossofanoilplatformbyastormmaybe1in10,000.Therisk,however,islargerforaninsurancecompanysincealltheplatformsinthesameareamaybeinsured,thusifastormdamagesoneinmaydamageallinthesamearea.Theresultisamuchlargerrisktotheinsurer•CatastropheBonds-(CATBonds)AllowinsurerstotransfertheirrisktobondholdersbysellingbondswhosecashflowpaymentsdependonthelevelofinsurablelossesNOToccurring.XiamenUniversity–AdvancedFinancialManagementFU-113.HedgingwithForwardsandFuturesBusinesshasriskBusinessRisk-variablecostsFinancialRisk-InterestratechangesGoal-EliminateriskHOW?Hedging&ForwardContractsXiamenUniversity–AdvancedFinancialManagementFU-123.HedgingwithForwardsandFuturesEx-Kelloggproducescereal.Amajorcomponentandcostfactorissugar.•Forecastedincome&salesvolumeissetbyusingafixedsellingprice.•Changesincostcanimpacttheseforecasts.•Tofixyoursugarcosts,youwouldideallyliketopurchaseallyoursugartoday,sinceyouliketoday’sprice,andmadeyourforecastsbasedonit.But,youcannot.•Youcan,however,signacontracttopurchasesugaratvariouspointsinthefutureforapricenegotiatedtoday.•Thiscontractiscalleda“FuturesContract.”•Thistechniqueofmanagingyoursugarcostsiscalled“Hedging.”XiamenUniversity–AdvancedFinancialManagementFU-133.HedgingwithForwardsandFutures1-SpotContract-Acontractforimmediatesale&deliveryofanasset.2-ForwardContract-Acontractbetweentwopeopleforthedeliveryofanassetatanegotiatedpriceonasetdateinthefuture.3-FuturesContract-Acontractsimilartoaforwardcontract,exceptthereisanintermediarythatcreatesastandardizedcontract.Thus,thetwopartiesdonothavetonegotiatethetermsofthecontract.TheintermediaryistheCommodityClearingCorp(CCC).TheCCCguaranteesalltrades&“provides”asecondarymarketforthespeculationofFutures.XiamenUniversity–AdvancedFinancialManagementFU-14TypesofFuturesCommodityFutures-Sugar-Corn-OJ(OrangeJuice)-Wheat-Soybeans-Porkbellies(theundersideofthepig)FinancialFutures-Tbills-Yen-GNMA(GovernmentNationalMortgageAssociation.Agovernment-ownedagencywhichbuysmortgagesfromlendinginstitutions-Stocks-EurodollarsIndexFutures-S&P500-ValueLineIndex-VanguardIndexSUGARXiamenUniversity–AdvancedFinancialManagementFU-154.FuturesContractConceptsNotanactualsaleAlwaysawinner&aloser(unlikestocks)Kare“settled”everyday.(MarkedtoMarket)Hedge-KusedtoeliminateriskbylockinginpricesSpeculation-KusedtogambleMargin-notasale-postpartialamount(futuresmargin期货保证金)HogK=30,000lbs(Hog=Pig)TbillK=$1.0milValuelineIndexK=$indexx500XiamenUniversity–AdvancedFinancialManagementFU-165.FuturesandSpotContractsyieldDividendratefreeRiskpricespotsToday'lengthtofcontractonpricefutures)1(00====−+=yrSFyrSFfttftThebasicrelationshipbetweenfuturespricesandspotpricesforequitysecurities.XiamenUniversity–AdvancedFinancialManagementFU-175.FuturesandSpotContractsExampleTheDAXspo