Bab 11 - Derivatives And Hedging Activities.docx
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Bab 11 - Derivatives And Hedging Activities.docx as PDF for free.
More details
- Words: 2,556
- Pages: 10
BAB 11
DERIVATIVES AND HEDGING ACTIVITIES DEFINING RISK Some risks relate to the effect of price changes on the value of assets and liabilities and the amount of contractual and forecasted future cash flows. The management of these risks is often referred to as hedging. We use the terms hedging and risk management identically. Hedging is designed to protect the firm against adverse movements in prices, interest rate and foreign currenc exchange rates. Hedging transaction include, but are not limited to, futures contracts, options, forward contracts, interest rate swaps, currency swaps, and combined interest rate and currency swaps. Firm may hedge existing assets and liabilities, firm commitments, and forecasted transactions. We define risk as potential variability of financial outcomes, or uncertainty. Future financial outcomes of firm activities are uncertain because they depend on unknown future prices. In some cases, this price risk is uncontrollable as it depends on factors such as technological change. Some price risk, however, relate to standardized commodities, interest rates, and foreign currency exchange rates. These risks can be managed by using derivatives and other hedging techniques. We say managed rather than reduced because risk management often involves replacing one risk with another one rather than reducing risk in an absolute sense.
FOREIGN CURRENCY RISK Firms that operate across national borders are exposed to the risk of changes in currency exchange rates. We examined the effects of exchange rate changes on reported sales, income, cash flows, assets, liabilities, and net worth. These effects also distort financial ratios based on these data. Firms with foreign currency risk must, therefore, first decide whether to hedge the accounting risk or the economic risk of foreign operations.
INTEREST RATE RISK When businesses borrow funds, the interest rate may be either fixed or variable. When the interest rate is variable, future interest expense and interest paid are uncertain as they depend on the future level of the reference rate. From the lender (creditor) point of view, variable rate loans or investments make future interest income and interest received
1
uncertain. When the interest rate is fixed, however, future interest expense (income) and interest paid (received) are known.
COMMODITY RISK Oil companies like PT. Chevron Pacific Indonesia (former as PT. Caltex Pacific Indonesia) are engaged in the exploration, production, refining, and marketing of crude oil. The revenues, expenses, and cash flows of these activities depend on the price of oil and gas, commodities whose price is the same for all producers and consumers. Chevron cannot control that price and the related uncertainty of future financial results. Other commodities have similar effects on firms that either produce or use them, including: 1. Other energy sources such as coal 2. Industrial metals such as iron, steel, aluminum, and copper 3. Precious metals such as gold, silver, and platinum 4. Agricultural commodities such as cotton, wheat, coffee, and sugar.
RISK OF CHANGES IN MARKET VALUE Fluctuations in foreign currency exchange rates, interest rate, and commodity prices can also affect the market value of assets and liabilities. For example, when the coupon rate is fixed, the market value of a bond varies inversely with interest rate changes. One consequence of the interrelationship of income/cash flow risk and market value risk is that managing one risk necessarily changes the other. Transactions that eliminate the market value risk (such as interest rate swaps) increase the income/cash flow risk. A second issue is that the accounting risk is often different from the market risk. When the fixed rate bond is carried at amortized cost, changes in its market value have no impact on the reported balance sheet.
EVENT RISK Sales and earnings of a given company are affected by innumerable events beyond its control. Firms can protect themselves, however, against some adverse events. For example, firms buy insurance against losses due to fire or storms. Hedging is another form of insurance. For example, weather derivatives reduce the risk to the firm of abnormal weather conditions. Credit risk. The risk that the firm will not receive payment, is another form of event risk.
2
BASIC DERIVATIVES AND HEDGING GLOSSARY Financial instruments deriving their value from changes in Derivatives
the value of an index, interest or exchange rates, or another financial instruments (the underlying)
Hedge
Financial instrument or transaction used to manage risk exposure The management of some risks relate to the effects of price change on the value of assets and liabilities and the amounts of contractual and forecasted future cash flows and designed to protect the firm against adverse
Hedging (risk management)
movements in prices, interest rates, and foreign currency exchange rates. Hedging include future contracts, options, forward contracts, interest rate swaps, currency swaps, and combined interest rate and currency swaps. Firms may hedge existing assets and liabilities, firm commitments, and forecast transactions
Risk Management
Foreign currency risk, interest rate risk, commodity risk,
categories
risk of changes in market value and event risk
Cash, a contract that requires the delivery or exchange of Financial instrument
cash or another financial instrument with another entity, or an ownership interest in another entity
Underlying
The specified risk (price, exchange rate, interest rate) that is being hedged. Contractual agreement between a buyer and a seller to
Forward Contract
deliver an asset in exchange for cash or another financial instrument at a specified future date. Price is fixed at the ! contract date for the life of the contract. Standardized forward contract normally traded on an
Futures Contract
organized exchange. The contract is marked to market daily, and margin is required
Option
An agreement that gives one party the unilateral right to buy (call option) or sell (put option) a specified quantity at 3
a specified price (the exercise price) until a specified maturity date Contractual agreement between a buyer and a seller to Spot Contract
deliver an asset in exchange for cash or another financial instrument. However, delivery may occur at a later (setdement) date Contract that exchanges one series of payments for another
Swap
(interest rate swap, and combined currency and interest rate swap)
SPOT & FORWARD TRANSACTION Forward Premium
: Forward rate > Spot rate
Forward Discount
: Forward rate < Spot rate
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
πΉβπ 12 π π ππππ‘β ππ ππππ€πππ
F - S 12 FORWARD PREMIUM (DISCOUNT) = % per annum Example: SPOT RATE
= $2.40/Β£
30 - DAYS FORWARD RATE
= $ 2.41 / Β£
TRANSACTION
= Β£ 100,000
We Perform Transactions: 1. Buy Sterling Against U.S Dollars (Sell $) For Spot Delivery, And 2. Sell Sterling Against U.S Dollars (Buy $) For Delivery 30 Days Later Catatan : Kesimpulan transaksi dilihat atau ditentukan dari ....... /Β£ nya di spot rate yang lebih kecil U.S Dollar - nya
4
DATE
TRANSACTION
CURRENCY $
Day 1
Buy sterling against dollars spot
- 240,000
Β£ + 100,000
Sell sterling against dollars for delivery in 30 days Day 31
n.c.f
Sell sterling against dollars as per
+241,000
n.c.f -100,000
contract on day 1 Notes : +: cash flow
-: cash outflow
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
n.c.f : no cash flow 2,41 β 2.40 12 π = 0,049 = 5% πππ ππππ’π 2.40 1
KASUS 1 : SPOT RATE 3 - MONTHS FORWARD RATE
$1.80/Β£ $ 1.79 / Β£
Diminta: 1. Bagaimana kesimpulan transaksi yang harus dilaksanakan ? 2. Buatkan tabel yang memperlihatkan cash flows (day 1) dan cash flows (3 months) 3. Apakah forward premium atau forward discount yang terjadi atas mata uang sterling ?
FOREIGN EXCHANGE QUOTATIONS A foreign exchange quotation is the price of a currency expressed in terms of another currency. Quotations in the foreign exchange market generally made in terms of local currency (the local unit of account) per unit foreign currency. Thus, in the United States, exchange rate are quoted in American terms of dollars per foreign monetary unit for example, $ 0.2 / FF and in France the quotations are made in terms of French fram ; per unit of foreign exchange for example , FF 5.00/ $. In the same manner, we can express a quote for the German mark, in American dollar terms, $ 0.50 / DM. The major exception to this practice in the United Kingdom, where foreign exchange prices are quoted in terms of foreign monetary units per pound sterling, for example, $ 2.20 / Β£ and FF 11.00/Β£. A foreign exchange quote involves statements about two currencies simultaneously. For example, if the price of the mark against the dollar moves from $ 0.50 / DM to $ 0.53 / DM, we can say that the mark has appreciated relative to the dollar by $ 0.03. This is the same as saying that the dollar has depreciated relative to the mark. 5
RECIPROCAL RATE If we wish to translate the quote of $ 0.50 / DM from American terms to German terms, we need only take the reciprocal of 0.50 as follows :
If
$/DM = 0.50 then DM/$ = 1 /0.50 = DM 2.00/$
CROSS RATE Having understood how the terms in which a quote is given can be changed by taking the reciprocal of the given quote, we can extend this concept to more than two currencies. The exchange rate between two given currencies can be obtained from the rates of these two currencies in terms of a third currencies. The resulting rate is called the cross rate. For example: $0.50/DM
and
$1.80/Β£
From these quotes we can obtain DM / Β£ and Β£ / DM as follows : DM/Β£ = DM/$ x $/Β£ and
Β£/DM = Β£/$ x $/DM
Thus, DM/Β£ = 1/0.5 x 1.80 = DM 3.6000/Β£ And,
Β£/DM = 1/1.80 x 0.50 = Β£ 0.2778/DM
COMPARING QUOTES FROM DIFFERENT TRADERS The computation of reciprocal rates and cross rates facilitates the comparison of quotes given by different sources when the quotes are expressed in different terms. As an example, consider the following quotes given by two traders, in their respective local terms: New York
Frankfurt
$0.51/DM
DM 2.00/$
To be able to compare the two quotes directly, we must first express them in the same terms, say, DM/$. This requires the computation of the reciprocal rate of $/DM in New York. The DM/$ rate for the two traders are as follows : New York
Frankfurt
DM 1,96/$ (= 1: 0,51)
DM 2.00/$ (as originally given)
NY = buy $, sell DM
Frankfurt = buy DM, sell $
6
Conclusion / recomendation : If we want to buy dollars against marks, we would prefer to do this with the trader in New York, if we want to sell dollars against marks, we would prefer todo this in Frankfurt.
The difference in quotatiion is called arbitrage. A discrepancy in quotes between two trader offers an opportunity fo somebody to profit by buying one currency against another from one trader at a price and reversing the transaction with the other trader at a higher price. The individual who performs these transactions is the arbitrageur.
KASUS 2 : New York
Zurich
$0,60 / SwF
SwF 1,67 / $
$0,51 / DM
SwF 0,87 / DM
Diminta: 1. Apakah terjadi transaksi arbitrage ? 2. Bagaimana transaksi dilakukan di New York dan Zurich ?
OUTRIGHT RATE The quotations for forward rates can be made in two way. They can be made in terms of the amount of local currency at which the quoter will buy and sell a unit of foreign currency.
Swaps Rate The fonvaid rates can also be quoted in terms of points of discount and/or premium from spot, it is used in inter-bank quotations. The outright rate is the spot rate adjusted by the swap rate.. To find the outright forward rates when the premiums ordiscounts on quotes of forward rates are given in terms of points (swap rate), the points are added to the spot price if the foreign currency is trading at a forward premium; the points are subtracted from the spot price if the foreign currency is trading at a forward discount. The resulting number is the outright forward rate. For example, when asked for spot, 1 - , 3 - , and 6 - month quotes on the French franc (FF), a trader based in the United States might quote the following :
7
SWAP RATE
SPOT
1 β MONTH
3 β MONTH
6 β MONTH
0,2186 / 9
2/3
6/5
11/10
If
Bid < Offer (in forward)
-> Premium, see 1 - month 2 < 3
If
Offer < Bid
-> Discount, see 3 - months 5 < 6
The outright rates: Maturity
Bid
Offer
SPOT
.2186
.2189
1 β MONTH
.2188
.2192
3 β MONTH
.2180
.2184
6 β MONTH
.2175
.2179
KASUS 3: Β£
: $ 2.0015/30 19/17 26/22 42/35
SwF
: $ 0.6963/69 4/6
9/14
25/38
Diminta: susun tabel the outright rates !
FOREIGN EXCHANGE AND MONEY MARKET Indicators :
FEM -> exchange rates MM -> interest rates
If a bank borrows 30-day marks in the inter-bank market at 13 % and invests the proceeds in a 30-day dollar placement with another bank of comparable credit standing at 15 %, the bank's risk is that the dollar may depreciate against the mark before the two transactions mature. Such a depreciation of the dollar could convert the initial 2 % interest gain intc a net loss. Spot rate
$ 0,4800 /DM
30 β day forward rate
$ 0,4812 /DM
30 β day interest rates:
DM
13%
US$
15%
Interest differential 2% in favor of the $ 8
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
0,4812 β 0.4800 12 π = 0,03 = 3% πππ ππππ’π 0.4800 1
That is, the premium of the forward mark against the dollar, 3 %, is larger than the interest differential of 2 % in favor of the dollar. Thus, there is an incentive to profit from covered-interest arbitrage. The arbitrageur could realize 1 % profit by performing the transactions described in the following table : -
Borrow US$
15%
Convert US $ into DM spot : Invests DM
+13%
Sell DM forward against $
+3%
Net profit
+1%
-
Borrow DM
13%
Convert US $ into US $ spot : Invests $
+15%
Sell $ forward against DM Net loss
-3% -1%
Example : $100.000 DATE
TRANSACTION
CURRENCY $
Day 1
Borrow $ at 15 % pa for 30 days Sell $ against DM spot
DM
+100,000
-
-100,000
+208,333
Invest DM at 13 % for 30 days
- 208,333
Sell DM against $ for delivery in 30 days Net cash flows Day 31
ncf
ncf
0
0
DM 208,333 investment mature Interest = 0.13 x 208,333 x 1/12
+210,590
= 2,257
9
$ 100,000 borrowing mature Interest = 0.15 x 100,000 x 1/l 2
-101,250
-=1,250 . Deliver on forward contract
+101,336
-210,590
+ 86
0
from day 1 Net cash flows
KASUS 4: Currency
Rp
SGD
MR
US$
AUD
Rp
1
6,200
2,500
10,120
5,300
SGD
?
?
?
?
?
MR
?
?
?
?
?
US$
?
?
?
?
?
AUD
?
?
?
?
?
KASUS 5 : New York
Zurich
Paris
Frankfurt
Amsterdam
$
0,5963/SwF
SwF
1,6769/$
FF
4,3772/$
DM 1.1223/SwF
Hfl 2.1I85/$
$
0,504/Hfl
SwF
0,4238/FF
FF
2,4340/DM
DM 0.4348/FF
Hfl
$
0,5410/DM
SwF
0,9289/DM
FF
2,5340/SwF DM 1.8550/$
Hfl 1.2054/SwF
$
0,224/FF
SwF
0,8550?Hfl
FF
2,1394/Hfl
Hfl
DM 0.9160/Hfl
1.0899/DM
0.4696/FF
Diminta: Bagaimana transaksi seharusnya dilakukan terhadap valas di masing-masing kota besar dunia tersebut ?
10
DERIVATIVES AND HEDGING ACTIVITIES DEFINING RISK Some risks relate to the effect of price changes on the value of assets and liabilities and the amount of contractual and forecasted future cash flows. The management of these risks is often referred to as hedging. We use the terms hedging and risk management identically. Hedging is designed to protect the firm against adverse movements in prices, interest rate and foreign currenc exchange rates. Hedging transaction include, but are not limited to, futures contracts, options, forward contracts, interest rate swaps, currency swaps, and combined interest rate and currency swaps. Firm may hedge existing assets and liabilities, firm commitments, and forecasted transactions. We define risk as potential variability of financial outcomes, or uncertainty. Future financial outcomes of firm activities are uncertain because they depend on unknown future prices. In some cases, this price risk is uncontrollable as it depends on factors such as technological change. Some price risk, however, relate to standardized commodities, interest rates, and foreign currency exchange rates. These risks can be managed by using derivatives and other hedging techniques. We say managed rather than reduced because risk management often involves replacing one risk with another one rather than reducing risk in an absolute sense.
FOREIGN CURRENCY RISK Firms that operate across national borders are exposed to the risk of changes in currency exchange rates. We examined the effects of exchange rate changes on reported sales, income, cash flows, assets, liabilities, and net worth. These effects also distort financial ratios based on these data. Firms with foreign currency risk must, therefore, first decide whether to hedge the accounting risk or the economic risk of foreign operations.
INTEREST RATE RISK When businesses borrow funds, the interest rate may be either fixed or variable. When the interest rate is variable, future interest expense and interest paid are uncertain as they depend on the future level of the reference rate. From the lender (creditor) point of view, variable rate loans or investments make future interest income and interest received
1
uncertain. When the interest rate is fixed, however, future interest expense (income) and interest paid (received) are known.
COMMODITY RISK Oil companies like PT. Chevron Pacific Indonesia (former as PT. Caltex Pacific Indonesia) are engaged in the exploration, production, refining, and marketing of crude oil. The revenues, expenses, and cash flows of these activities depend on the price of oil and gas, commodities whose price is the same for all producers and consumers. Chevron cannot control that price and the related uncertainty of future financial results. Other commodities have similar effects on firms that either produce or use them, including: 1. Other energy sources such as coal 2. Industrial metals such as iron, steel, aluminum, and copper 3. Precious metals such as gold, silver, and platinum 4. Agricultural commodities such as cotton, wheat, coffee, and sugar.
RISK OF CHANGES IN MARKET VALUE Fluctuations in foreign currency exchange rates, interest rate, and commodity prices can also affect the market value of assets and liabilities. For example, when the coupon rate is fixed, the market value of a bond varies inversely with interest rate changes. One consequence of the interrelationship of income/cash flow risk and market value risk is that managing one risk necessarily changes the other. Transactions that eliminate the market value risk (such as interest rate swaps) increase the income/cash flow risk. A second issue is that the accounting risk is often different from the market risk. When the fixed rate bond is carried at amortized cost, changes in its market value have no impact on the reported balance sheet.
EVENT RISK Sales and earnings of a given company are affected by innumerable events beyond its control. Firms can protect themselves, however, against some adverse events. For example, firms buy insurance against losses due to fire or storms. Hedging is another form of insurance. For example, weather derivatives reduce the risk to the firm of abnormal weather conditions. Credit risk. The risk that the firm will not receive payment, is another form of event risk.
2
BASIC DERIVATIVES AND HEDGING GLOSSARY Financial instruments deriving their value from changes in Derivatives
the value of an index, interest or exchange rates, or another financial instruments (the underlying)
Hedge
Financial instrument or transaction used to manage risk exposure The management of some risks relate to the effects of price change on the value of assets and liabilities and the amounts of contractual and forecasted future cash flows and designed to protect the firm against adverse
Hedging (risk management)
movements in prices, interest rates, and foreign currency exchange rates. Hedging include future contracts, options, forward contracts, interest rate swaps, currency swaps, and combined interest rate and currency swaps. Firms may hedge existing assets and liabilities, firm commitments, and forecast transactions
Risk Management
Foreign currency risk, interest rate risk, commodity risk,
categories
risk of changes in market value and event risk
Cash, a contract that requires the delivery or exchange of Financial instrument
cash or another financial instrument with another entity, or an ownership interest in another entity
Underlying
The specified risk (price, exchange rate, interest rate) that is being hedged. Contractual agreement between a buyer and a seller to
Forward Contract
deliver an asset in exchange for cash or another financial instrument at a specified future date. Price is fixed at the ! contract date for the life of the contract. Standardized forward contract normally traded on an
Futures Contract
organized exchange. The contract is marked to market daily, and margin is required
Option
An agreement that gives one party the unilateral right to buy (call option) or sell (put option) a specified quantity at 3
a specified price (the exercise price) until a specified maturity date Contractual agreement between a buyer and a seller to Spot Contract
deliver an asset in exchange for cash or another financial instrument. However, delivery may occur at a later (setdement) date Contract that exchanges one series of payments for another
Swap
(interest rate swap, and combined currency and interest rate swap)
SPOT & FORWARD TRANSACTION Forward Premium
: Forward rate > Spot rate
Forward Discount
: Forward rate < Spot rate
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
πΉβπ 12 π π ππππ‘β ππ ππππ€πππ
F - S 12 FORWARD PREMIUM (DISCOUNT) = % per annum Example: SPOT RATE
= $2.40/Β£
30 - DAYS FORWARD RATE
= $ 2.41 / Β£
TRANSACTION
= Β£ 100,000
We Perform Transactions: 1. Buy Sterling Against U.S Dollars (Sell $) For Spot Delivery, And 2. Sell Sterling Against U.S Dollars (Buy $) For Delivery 30 Days Later Catatan : Kesimpulan transaksi dilihat atau ditentukan dari ....... /Β£ nya di spot rate yang lebih kecil U.S Dollar - nya
4
DATE
TRANSACTION
CURRENCY $
Day 1
Buy sterling against dollars spot
- 240,000
Β£ + 100,000
Sell sterling against dollars for delivery in 30 days Day 31
n.c.f
Sell sterling against dollars as per
+241,000
n.c.f -100,000
contract on day 1 Notes : +: cash flow
-: cash outflow
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
n.c.f : no cash flow 2,41 β 2.40 12 π = 0,049 = 5% πππ ππππ’π 2.40 1
KASUS 1 : SPOT RATE 3 - MONTHS FORWARD RATE
$1.80/Β£ $ 1.79 / Β£
Diminta: 1. Bagaimana kesimpulan transaksi yang harus dilaksanakan ? 2. Buatkan tabel yang memperlihatkan cash flows (day 1) dan cash flows (3 months) 3. Apakah forward premium atau forward discount yang terjadi atas mata uang sterling ?
FOREIGN EXCHANGE QUOTATIONS A foreign exchange quotation is the price of a currency expressed in terms of another currency. Quotations in the foreign exchange market generally made in terms of local currency (the local unit of account) per unit foreign currency. Thus, in the United States, exchange rate are quoted in American terms of dollars per foreign monetary unit for example, $ 0.2 / FF and in France the quotations are made in terms of French fram ; per unit of foreign exchange for example , FF 5.00/ $. In the same manner, we can express a quote for the German mark, in American dollar terms, $ 0.50 / DM. The major exception to this practice in the United Kingdom, where foreign exchange prices are quoted in terms of foreign monetary units per pound sterling, for example, $ 2.20 / Β£ and FF 11.00/Β£. A foreign exchange quote involves statements about two currencies simultaneously. For example, if the price of the mark against the dollar moves from $ 0.50 / DM to $ 0.53 / DM, we can say that the mark has appreciated relative to the dollar by $ 0.03. This is the same as saying that the dollar has depreciated relative to the mark. 5
RECIPROCAL RATE If we wish to translate the quote of $ 0.50 / DM from American terms to German terms, we need only take the reciprocal of 0.50 as follows :
If
$/DM = 0.50 then DM/$ = 1 /0.50 = DM 2.00/$
CROSS RATE Having understood how the terms in which a quote is given can be changed by taking the reciprocal of the given quote, we can extend this concept to more than two currencies. The exchange rate between two given currencies can be obtained from the rates of these two currencies in terms of a third currencies. The resulting rate is called the cross rate. For example: $0.50/DM
and
$1.80/Β£
From these quotes we can obtain DM / Β£ and Β£ / DM as follows : DM/Β£ = DM/$ x $/Β£ and
Β£/DM = Β£/$ x $/DM
Thus, DM/Β£ = 1/0.5 x 1.80 = DM 3.6000/Β£ And,
Β£/DM = 1/1.80 x 0.50 = Β£ 0.2778/DM
COMPARING QUOTES FROM DIFFERENT TRADERS The computation of reciprocal rates and cross rates facilitates the comparison of quotes given by different sources when the quotes are expressed in different terms. As an example, consider the following quotes given by two traders, in their respective local terms: New York
Frankfurt
$0.51/DM
DM 2.00/$
To be able to compare the two quotes directly, we must first express them in the same terms, say, DM/$. This requires the computation of the reciprocal rate of $/DM in New York. The DM/$ rate for the two traders are as follows : New York
Frankfurt
DM 1,96/$ (= 1: 0,51)
DM 2.00/$ (as originally given)
NY = buy $, sell DM
Frankfurt = buy DM, sell $
6
Conclusion / recomendation : If we want to buy dollars against marks, we would prefer to do this with the trader in New York, if we want to sell dollars against marks, we would prefer todo this in Frankfurt.
The difference in quotatiion is called arbitrage. A discrepancy in quotes between two trader offers an opportunity fo somebody to profit by buying one currency against another from one trader at a price and reversing the transaction with the other trader at a higher price. The individual who performs these transactions is the arbitrageur.
KASUS 2 : New York
Zurich
$0,60 / SwF
SwF 1,67 / $
$0,51 / DM
SwF 0,87 / DM
Diminta: 1. Apakah terjadi transaksi arbitrage ? 2. Bagaimana transaksi dilakukan di New York dan Zurich ?
OUTRIGHT RATE The quotations for forward rates can be made in two way. They can be made in terms of the amount of local currency at which the quoter will buy and sell a unit of foreign currency.
Swaps Rate The fonvaid rates can also be quoted in terms of points of discount and/or premium from spot, it is used in inter-bank quotations. The outright rate is the spot rate adjusted by the swap rate.. To find the outright forward rates when the premiums ordiscounts on quotes of forward rates are given in terms of points (swap rate), the points are added to the spot price if the foreign currency is trading at a forward premium; the points are subtracted from the spot price if the foreign currency is trading at a forward discount. The resulting number is the outright forward rate. For example, when asked for spot, 1 - , 3 - , and 6 - month quotes on the French franc (FF), a trader based in the United States might quote the following :
7
SWAP RATE
SPOT
1 β MONTH
3 β MONTH
6 β MONTH
0,2186 / 9
2/3
6/5
11/10
If
Bid < Offer (in forward)
-> Premium, see 1 - month 2 < 3
If
Offer < Bid
-> Discount, see 3 - months 5 < 6
The outright rates: Maturity
Bid
Offer
SPOT
.2186
.2189
1 β MONTH
.2188
.2192
3 β MONTH
.2180
.2184
6 β MONTH
.2175
.2179
KASUS 3: Β£
: $ 2.0015/30 19/17 26/22 42/35
SwF
: $ 0.6963/69 4/6
9/14
25/38
Diminta: susun tabel the outright rates !
FOREIGN EXCHANGE AND MONEY MARKET Indicators :
FEM -> exchange rates MM -> interest rates
If a bank borrows 30-day marks in the inter-bank market at 13 % and invests the proceeds in a 30-day dollar placement with another bank of comparable credit standing at 15 %, the bank's risk is that the dollar may depreciate against the mark before the two transactions mature. Such a depreciation of the dollar could convert the initial 2 % interest gain intc a net loss. Spot rate
$ 0,4800 /DM
30 β day forward rate
$ 0,4812 /DM
30 β day interest rates:
DM
13%
US$
15%
Interest differential 2% in favor of the $ 8
πΉππ ππ΄π π· ππ πΈππΌππ (π·πΌππΆππππ) =
0,4812 β 0.4800 12 π = 0,03 = 3% πππ ππππ’π 0.4800 1
That is, the premium of the forward mark against the dollar, 3 %, is larger than the interest differential of 2 % in favor of the dollar. Thus, there is an incentive to profit from covered-interest arbitrage. The arbitrageur could realize 1 % profit by performing the transactions described in the following table : -
Borrow US$
15%
Convert US $ into DM spot : Invests DM
+13%
Sell DM forward against $
+3%
Net profit
+1%
-
Borrow DM
13%
Convert US $ into US $ spot : Invests $
+15%
Sell $ forward against DM Net loss
-3% -1%
Example : $100.000 DATE
TRANSACTION
CURRENCY $
Day 1
Borrow $ at 15 % pa for 30 days Sell $ against DM spot
DM
+100,000
-
-100,000
+208,333
Invest DM at 13 % for 30 days
- 208,333
Sell DM against $ for delivery in 30 days Net cash flows Day 31
ncf
ncf
0
0
DM 208,333 investment mature Interest = 0.13 x 208,333 x 1/12
+210,590
= 2,257
9
$ 100,000 borrowing mature Interest = 0.15 x 100,000 x 1/l 2
-101,250
-=1,250 . Deliver on forward contract
+101,336
-210,590
+ 86
0
from day 1 Net cash flows
KASUS 4: Currency
Rp
SGD
MR
US$
AUD
Rp
1
6,200
2,500
10,120
5,300
SGD
?
?
?
?
?
MR
?
?
?
?
?
US$
?
?
?
?
?
AUD
?
?
?
?
?
KASUS 5 : New York
Zurich
Paris
Frankfurt
Amsterdam
$
0,5963/SwF
SwF
1,6769/$
FF
4,3772/$
DM 1.1223/SwF
Hfl 2.1I85/$
$
0,504/Hfl
SwF
0,4238/FF
FF
2,4340/DM
DM 0.4348/FF
Hfl
$
0,5410/DM
SwF
0,9289/DM
FF
2,5340/SwF DM 1.8550/$
Hfl 1.2054/SwF
$
0,224/FF
SwF
0,8550?Hfl
FF
2,1394/Hfl
Hfl
DM 0.9160/Hfl
1.0899/DM
0.4696/FF
Diminta: Bagaimana transaksi seharusnya dilakukan terhadap valas di masing-masing kota besar dunia tersebut ?
10
